Report Offers Road Map to Protect Borrowers Attempting to Certify Their Employers as Eligible under the Public Service Loan Forgiveness Program
August 12, 2020 | WASHINGTON, DC — The American Federation of Teachers and the Student Borrower Protection Center today released an investigative report exposing new instances of mismanagement and abuse in the scandal-plagued Public Service Loan Forgiveness program. A joint investigation found routine errors, poor recordkeeping and conflicting policies throughout the process for determining whether borrowers’ employers qualify them for federal loan forgiveness.
These breakdowns can confuse or deter PSLF applicants, deny borrowers their right to relief, and jeopardize loan forgiveness for the millions of public service workers being forced to leave and re-enter the workforce at this time. The organizations issued new recommendations to strengthen this key component of the federal program as part of a joint ongoing effort to design a road map to restore the promise of PSLF. The AFT and the SBPC are also encouraging watchdogs and researchers to explore the new trove of documents released through the investigation.
The new report, “Broken Promises: Employment Certification Failure,” is available at: https://protectborrowers.org/wp-content/uploads/2020/08/ECF-Failures.pdf
“Mismanagement on the scale reflected in these documents is exactly why we have sued Betsy DeVos and the Department of Education over their failed stewardship of this program,” said AFT President Randi Weingarten. “Nearly everything that is wrong with the department’s process of certifying employers could be fixed with simple administrative steps, but she has refused, with constant excuses that make things worse for borrowers and better for servicers.
As a union, we’ve taken this administration to court, and through our Summer debt relief program, have come up with “right now” solutions for our members who need help managing their loan payments as soon as possible. But, thousands of educators, nurses, military veterans and other public employees have been counting on the promise of Public Service Loan Forgiveness since 2007, and this report is yet another example of how this administration continues to create roadblocks at every corner to keep the promise of PSLF from becoming a reality.”
“Today’s investigation offers new evidence that borrowers may have been wrongly denied their right to loan forgiveness, and tens of thousands more are being confused or misled, or are currently in jeopardy because of government mismanagement and industry abuse,” said SBPC Executive Director Seth Frotman. “Policymakers should immediately implement new reforms to better protect borrowers working in public service and demand justice for those harmed by years of mismanagement and abuse.”
Certifying Public Service Employment
In order to receive loan forgiveness through the Public Service Loan Forgiveness program, borrowers must be employed in a public service job. Since 2012, the Department of Education has administered an “employment certification” process through which the principal PSLF loan servicer, the Pennsylvania Higher Education Assistance Agency, evaluates information provided by borrowers in an Employment Certification Form and determines whether a borrowers’ employer qualifies under PSLF. Since the Employment Certification Form process launched, borrowers have had their employers rejected by the Department of Education over 50,000 times for being “ineligible” for PSLF.
In recent years, law enforcement officials have issued warnings about an employer certification system that leaves borrowers vulnerable to the whims of individual student loan company personnel and Education Department staff, with little recourse when borrowers encounter trouble. Borrowers and public service organizations have also raised concerns about the lack of clear employment eligibility criteria and an opaque decision-making process when borrowers attempt to certify that their employment is eligible.
For instance, in 2016, the American Bar Association and four public service workers sued the Department of Education for telling some public service workers they were no longer eligible for PSLF despite being approved through the Employment Certification Form years earlier. In 2019, a federal judge ruled that the Department of Education acted “arbitrarily and capriciously” when changing its standard for approving certain public service organizations and applying that new standard retroactively. Earlier this year, the Department of Education settled with the ABA, offering new evidence that the government’s troubled management of PSLF has hurt borrowers.
The joint report by the AFT and the SBPC relied on the federal Freedom of Information Act to obtain thousands of pages of correspondence between and among staff at the Education Department and PHEAA. These documents depict a chaotic, disorganized program without critical recordkeeping or management processes in place.
Key findings include:
- Borrowers whose employment had been certified as eligible for PSLF were later reconsidered and rejected. In some cases, borrowers spent years working toward loan forgiveness only to have the Education Department later reject their employer years later, damaging their financial lives. These findings offer evidence that the allegations made in the recently settled lawsuit affected more borrowers than previously acknowledged.
- Borrowers employed by the same organization received different answers when seeking to certify their employment. Records produced by the Department of Education reveal that PHEAA employees made inconsistent determinations when evaluating employers’ eligibility for PSLF, particularly where an organization was not a 501(c)(3) nonprofit or a government agency. In some cases, borrowers working for the same organizations received conflicting correspondence. For example, multiple borrowers submitting Employment Certification Forms from AARP and the Fair Elections Legal Network received different determinations upon submitting documentation.
- There is no rigorous, standardized process for certifying employers. New evidence obtained by the AFT and the SBPC suggests that personnel at PHEAA and the Education Department lack a rigorous, standardized process, instead making subjective determinations about the nature of public service work. In several cases, individual servicer employees were granted wide latitude to make qualitative judgments about the nature of nonprofits’ missions and to deny certifications to these nonprofits on an ad hoc basis.
- The PSLF program is plagued by poor recordkeeping. The investigation reveals that the federal government never possessed a comprehensive dataset of employers certified as eligible public service organizations, leaving the public without the benefit of a registry of these organizations, and leaving staff without access to critical data to track decisions and do their jobs effectively. A purportedly comprehensive list was compiled only in response to this investigation in June 2019. Records produced by the Department of Education reveal that an initial list was created in 2016, but this document was error-ridden and demonstrates that the Education Department once approved organizations it would later reject as unqualified.
- Borrowers lack a clear process or a formal right to appeal if their employer is rejected. Borrowers’ employment is routinely rejected by the Department of Education, however, borrowers have no formal process to appeal rejections if they believe such a decision was made in error. Documents and correspondence produced by the Department of Education confirm that such errors do occur, and they raise questions about whether the absence of such a process has deterred or derailed access to loan forgiveness for an unknown number of public service workers with student debt.
These findings indicate widespread failures by both the Department of Education and the student loan company managing the PSLF program. The report includes a list of recommendations to the Education Department and its student loan servicers to address these breakdowns:
- Issue new rules to simplify and expand the definitions of “public service,” “public service job” and “public service organization.” Findings suggest that current regulations are implemented arbitrarily and would benefit from an immediate overhaul. The Department of Education should initiate a rule-making to ensure all borrowers, federal employees, contractors and other stakeholders have rules of the road consistent with Congress’ intent when establishing a broad-based right to loan forgiveness.
- Provide transparency to borrowers around employment certification denials. Borrowers are routinely left in the dark on why an employer may have been rejected. The Department of Education should provide each borrower with a clear, plain-language explanation of the basis for any denial, modeled on the requirements currently in place when banks and other lenders deny consumers access to credit.
- Establish a straightforward appeals process that all borrowers and organizations can access when a public service organization is rejected. The Department of Education should issue public guidance to establish a fair, consistent and transparent appeal process and ensure final decisions are made by federal employees.
- Publish a registry of certified public service organizations. For the benefit of its staff, contractors and the public, the Department of Education should regularly collect and publish a list of employers considered under PSLF, indicating eligible employers, denied employers and those pending determination. This registry is urgently needed, as millions of public service workers look to re-enter the workforce following pandemic-related layoffs. Access to a registry of previously approved public service employers can ensure those with student debt can remain on track for PSLF.
These recommendations are part of an ongoing joint effort by the AFT and the SBPC to develop a road map to address the widespread breakdowns plaguing PSLF. This effort aims to restore the promise of this critical protection and obtain justice for the student loan borrowers harmed by a decade of government mismanagement and industry abuses.
Call to Watchdogs, Researchers, and the Public
As part of the investigation, the organizations are releasing a trove of new records today obtained through federal and state open records laws.
The records being made publicly available include more than 9,000 pages of correspondence and records featuring deliberations between the Department of Education and PHEAA concerning eligibility of applicants for PSLF. Records also include the first purportedly “comprehensive” list of approved and denied employers.
Documents obtained through the investigation, including a new database of employers approved and rejected for PSLF, are available at: https://protectborrowers.org/the-internal-government-communications-and-records-exposing-the-broken-employer-certification-process/
The Public Service Loan Forgiveness program was created by Congress in 2007 to provide public service workers with student loan debt relief in exchange for a decade of service in their communities. Unfortunately, since its inception, the program has been mishandled and undermined by the Department of Education and its contracted loan servicers, with only a small portion of eligible public service workers accessing their right to relief.
According to the Department of Education, the Public Service Loan Forgiveness program continues to have a nearly 99 percent denial rate.
This report is part of a joint investigation conducted by the American Federation of Teachers and the Student Borrower Protection Center examining administration of the PSLF program by the government and its contractors in an effort to expose the mismanagement and abuse that has denied or delayed millions of public service workers access to this critical program. This investigation builds on the work of regulators, law enforcement officials, government watchdogs and private litigants.
The inaugural report in this joint investigation from the AFT and the SBPC, “Keeping the Promise of Public Service Loan Forgiveness,” is available at: https://protectborrowers.org/pslf-investigation/
American Federation of Teachers
Phone: (607) 280-6603
Student Borrower Protection Center
Phone: (708) 476-5454
The AFT represents 1.7 million pre-K through 12th-grade teachers; paraprofessionals and other school-related personnel; higher education faculty and professional staff; federal, state and local government employees; nurses and healthcare workers; and early childhood educators.
The Student Borrower Protection Center is a nonprofit organization focused on alleviating the burden of student debt for millions of Americans. SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.