For debt-ridden Americans in federal student loan forgiveness programs, October is a month of hope and trepidation.
The first wave of college graduates who were accepted into the Public Service Loan Forgiveness Program 10 years ago and made their payments faithfully each month are eagerly waiting to find out this October whether their debt is wiped clean, as promised.
In addition, a lawsuit charging the Department of Education with reversing its course on student loan forgiveness goes to a hearing in early October.
What happens will not only determine the fate of the first borrowers to complete the program — it’s a bellwether for the more than half a million college graduates enrolled in the program who are anxiously watching to see whether the government upholds its end of the bargain. The Department of Education created the program in 2007 so that college students could have their student loans wiped out if they worked in a public service job after graduation and followed rigorous repayment guidelines for 10 years.
So far, the signals from the government have been unsettling.
The lawsuit against the Department of Education, which is set for hearing in U.S. District Court on October 6, asserts that four borrowers — all attorneys — had their years of public service work disqualified retroactively. They had graduated with six-figure debt and enrolled in the federal Public Service Loan Forgiveness Program, working as public service attorneys for nonprofits and following the program’s rigorous repayment guidelines. Year after year, the government led them to believe they were on track for loan forgiveness.
Then, without warning, the complaint says, the education department did an about-face last year, disqualifying their workplaces, discounting their years of public service, and “dashing their hopes for future financial security.”
The attorneys worked for the American Bar Association, the American Immigration Lawyers Association and Vietnam Veterans of America, all organizations that had qualified for the student loan forgiveness program – until it was almost time for the government to make good on its promises.
The American Bar Association lambasted the education department’s actions.
The Department of Education’s decision to apply this new policy retroactively was “outrageous,” showing that the letters the department issued to the four law students certifying their eligibility “are not worth the paper they were written on,” Bar Association Executive Director Jack Rives said in a statement.
New policy “remarkable for its callousness”
Consumer advocates and organizations representing student loan borrowers have also denounced the agency’s position.
“This means you could be accepted into the program and make payments for 8 years or more, only to find that you don’t qualify,” said Natalia Abrams, executive director of Student Debt Crisis, a nonprofit dedicated to reforming higher education loan policies. “It sent a chill down the spines of borrowers everywhere.”
The ABA and the four attorneys filed a complaint against the Department of Education in December 2016. But rather than clarify whether their organizations qualify as public service nonprofits, the Department of Education’s latest motion to dismiss the case, filed this August, threatened the other half-million Americans in the Public Service Loan Forgiveness program.
The department argued that its letters approving students participation in the loan forgiveness program were invalid. Acceptance into the program, the agency said, was merely an “interim” decision and could be rescinded at any point. The department added it has not yet made a decision to forgive any student loans. Chong Park, a partner in the law firm Ropes and Gray who is representing the ABA and the four plaintiffs, called the agency’s reversal “cavalier,”“unfair” and “unlawful.”
The new policy sent shock waves through the 550,000 students already accepted into the forgiveness program who trusted the government to uphold its end of the bargain. Like victims of a scam, borrowers feel shocked, frightened and betrayed.
“It’s horrible,” said Texas parole officer Brian Jones, who has about $30,000 in loans. “I was really depending on that to move on with my life and I don’t know what I’m going to do.”
The government’s stand “is remarkable for its callousness,” said Abrams. “People planned their lives around this program. Now they may lose their ability to save for retirement or buy a house.”
‘No reason to make this a partisan issue’
Earlier this year, 36 Senators sent a letter to Secretary of Education Betsy DeVos expressing their concern over the agency’s revocation of students’ eligibility in the student loan forgiveness program.
Abrams says Student Debt Crisis urges everyone in the student loan forgiveness program to continue paying their loans and keep copious records, “even though we can’t offer any guarantees at this point.” The Trump Administration’s proposed budget seeks to eliminate the student loan forgiveness program, and alarmed consumer and education groups have urged borrowers to pressure their senators to keep the program intact.
“There’s no reason for the administration to make this a partisan issue,” said Abrams. “It was started under a Republican administration, and our country has always encouraged and honored public service. We’ll always need teachers, firefighters, police officers and other people working for the public good.”
Student Debt Crisis has reached out to Secretary of Education DeVos, but without success. “Unlike the previous administration, the higher-ups at the Department of Education have not met with us,” Abrams said. “Our members have sent up to 80,000 emails at a time, but we’ve had no call backs.”
Agency still promoting forgiveness program
As National Public Radio has noted, a 2016 blog still on the Department of Education website continues to promote the “broad, employer-based forgiveness program” for people who take out federal student loans to become teachers, fire fighters, police officers, social workers, public interest attorneys and other public servants.
The blog explains that if you graduate and work for the government or a non-profit, have a federal Direct Loans or consolidate your other loans into a direct loan, and make 10 years of steady payments, you only have to submit an Employment Certification Form (ECF) every year or when you change jobs “to apply for forgiveness with confidence.”
But confidence is the last thing many student loan borrowers feel at this point.
“My debt was $30,000 when I graduated. My payments have always been income-based and I’ve never defaulted,” one nonprofit employee in Missoula, Montana who joined the forgiveness program six years ago wrote in a message to SDC. She cannot survive financially, she says, without the loan forgiveness program. “I have been paying that $30,000 for 25 years and [through compounding interest] it has grown to an impossible $280,000 balance…This is legal loan-sharking.”
On a different note, on Monday the Consumer Financial Protection Bureau forced National Collegiate Loan Trusts to refund $3.5 million to 2,000 private student loan borrowers harmed by its illegal lawsuits. The CFPB encourages anyone harmed by the organization, which oversees more than 800,000 private students loans, to file a complaint.