A student loan forgiveness overhaul hits an early stumbling block An NPR investigation found that student borrowers were prematurely rejected under the revamped Public Service Loan Forgiveness program. The Education Department has promised a fix.

Borrowers say they were wrongly denied loan forgiveness. Now, help is on the way

  • Download
  • <iframe src="https://www.npr.org/player/embed/1051463060/1053443014" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

STEVE INSKEEP, HOST:

We follow up now on a story of student loans. In early October, the U.S. Department of Education unveiled an overhaul of the Public Service Loan Forgiveness Program. This involves student loans for people who go into public service. The program had been mismanaged for years, and the Biden administration weeks ago relaxed the rules for loan forgiveness. But we've learned that borrowers are still being rejected. NPR's Cory Turner is covering this story. Cory, good morning.

CORY TURNER, BYLINE: Good morning, Steve.

INSKEEP: What was the problem the education department was trying to fix?

TURNER: Yeah, so the program was supposed to be pretty simple. Borrowers work for 10 years in public service while making payments towards their federal student loans, and then after that, the idea was the government would forgive whatever is left of their college debts. But when it was created back in 2007, most borrowers had the wrong kind of loans, and subsequently, many were put in the wrong kind of repayment plan. There was a ton of confusion. And in recent years, there's been a ton of frustration from borrowers as they hit their 10 years of public service but they don't qualify for forgiveness. So last month, the department used its time-limited pandemic authority to essentially retroactively relax those rules. It says it will now count payments made on all sorts of federal student loans. It will also include - count payments made on wrong repayment plans. But when borrowers immediately started sending in updated applications, some got rejected all over again.

INSKEEP: Why did the government not know that the government had changed its own rules?

TURNER: (Laughter) Well, I spent a lot of time on the phone last week, Steve, trying to answer that question. I spoke with the department. I also spoke with the loan company in charge of managing the PSLF program. They're called FedLoan. And it turns out for at least three weeks after the overhaul, which was October 6, FedLoan was still using those old rules because it hadn't transitioned to the new ones. And basically, what I learned in conversations with both sides is - FedLoan told me, look; these are huge changes. The ed department, they said, had not given them the details or the guidance that they needed to make those changes. You know, they service millions of borrowers, and hundreds of thousands are going through the PSLF system. The department disputes FedLoan's version, though. They sent me three separate emails that they sent to servicers explaining these updates. After I raised the issue, the department sent FedLoan an email demanding that it stop rejecting potentially eligible borrowers. And the company told me that it complied with that order early last week.

INSKEEP: Oh, so supposedly, I guess, you'll keep reporting. Supposedly, the problem has been fixed for now. But there's this matter of people who reapplied and were rejected in recent weeks. What happens now to them?

TURNER: Yeah. I mean, part of the problem here, Steve, is just a lack of faith in this system that has been so troubled for so long. The Ed department assured me that it will work with FedLoan to identify all of these borrowers automatically. Folks don't have to do anything new. It will then reprocess their loan forgiveness applications, and presumably, things will go better; they will be processed based on the new rules. It's also worth noting the department has already sent notices to more than half-a-million borrowers telling them, under these new rules, here's how much closer you are to loan forgiveness because a lot of this overhaul is actually happening internally at the department. And a senior department official told me just Friday that the first round of borrowers can expect to have their loans forgiven within a matter of weeks. So overall, a pain for borrowers right now, but they are being addressed.

INSKEEP: Glad you called and asked. Cory, thanks.

TURNER: You're welcome, Steve.

INSKEEP: NPR's Cory Turner.

(SOUNDBITE OF GABOR DEUSTCH'S "LOVE GARDEN")

Copyright © 2021 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.