Exclusive: Public Service Loan Forgiveness to get Education Department overhaul The program's confusing requirements led to crowds of frustrated borrowers being denied debt relief. The department is expected to make immediate, retroactive fixes and to simplify the overall rules.

NPR Exclusive: Troubled Public Service Loan Forgiveness program will get overhaul

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A MARTINEZ, HOST:

We have an NPR exclusive. That troubled student debt relief program for teachers, police officers and other public servants is going to get a major revision. Sources tell NPR that next week the U.S. Department of Education will unveil a sweeping overhaul of the Public Service Loan Forgiveness program.

NPR's Cory Turner has been reporting on the program for several years. Cory, what are you hearing?

CORY TURNER, BYLINE: Yeah. So according to a source familiar with the Ed Department plans but not authorized to discuss them publicly, the changes to the program, commonly known as PSLF, are going come in two phases. So one, looking forward there's going be a long-term renovation done through a process known as rule-making. But what's really unusual here is that the department also wants to use its executive authority as a kind of time machine to basically help borrowers now by retroactively relaxing the program's rules.

MARTINEZ: OK. So let's unpack that for a bit. How have these rules been hanging up borrowers, and how does that department plan to help?

TURNER: Sure. So to qualify for PSLF, borrowers have to work in government or nonprofit jobs. They have to make 120 on-time loan payments, which is 10 years' worth. They also have to be in a specific repayment plan and have a specific kind of loan. But over the years - we've heard these stories - loan companies, as well as the Ed Department, have done a really bad job at times communicating these rules.

For example, you need to have a federal direct loan. But when PSLF was created, most borrowers had a different kind of loan. It's called a FFEL loan. I've spoken with lots of borrowers who are teachers or nurses. You know, they're repaying their student loans only realize two, three, four, five years into the process their FFEL loans didn't count toward PSLF.

One of those borrowers is Joaquin Arguello, a school social worker in Albuquerque. He says he repeatedly told the company managing his loans that he wanted to pursue Public Service Loan Forgiveness. But he says they never told him his FFEL loans wouldn't qualify. So he is still paying down those debts, even though he's worked more than a decade in public service. And he's frustrated because he says loan companies have an ethical obligation to be up front with borrowers.

JOAQUIN ARGUELLO: It's just disgusting, man. It doesn't feel human. And it made me feel bad because I help families learn how to self-advocate for themselves, learn how to access resources. But here I am with a master's degree still getting duped.

TURNER: But now, here's the good news for borrowers. Under this new retroactive flexibility, the Ed Department will count payments on loans that were previously disqualified, as long as borrowers, like Joaquin, can still prove they were working in public service. The same is also going to be true for the program's repayment plan. Now, even if borrowers were in the wrong plan, as many were, they will soon be able to get credit for those payments.

MARTINEZ: So does this mean we could see maybe a surge of borrowers suddenly qualifying for loan forgiveness?

TURNER: Yeah. It would not surprise me. It's hard to know at this point. I will say that details of the department's plans obtained by NPR suggest that potentially tens of thousands of borrowers could see their loans cancelled, while hundreds of thousands could at least see a drop in the number of payments they're still required to make before they get forgiveness.

MARTINEZ: NPR's Cory Turner - Cory, thanks.

TURNER: You're welcome.

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