By Amy Czulada and Ben Kaufman | September 23, 2021
The Public Service Loan Forgiveness Program was created with a clear promise in mind: after ten years of service to our nation or in their communities, public service workers would be given the opportunity to have their loans forgiven. However, fourteen years after PSLF’s implementation, people who thought they were pursuing relief have been derailed by industry malfeasance, policy pitfalls, and negligence by the Department of Education (ED). PSLF now has a 98 percent rejection rate—and the expansion meant to fix it has a 97 percent denial rate.
One key group of public service workers being denied promised relief are those whose loans were taken out under the Federal Family Education Loan Program (FFELP), which existed from 1965 to 2010. FFELP involved loans that were issued by private lenders, but subsidized and guaranteed by the federal government. Under the law, these loans are not eligible for PSLF. Only Direct loans—loans issued directly by ED—can be forgiven through this program.
Borrowers owing on FFELP loans can become eligible for PSLF by consolidating their loans into a Direct loan. In fact, when making PSLF, Congress explicitly created this key pathway for FFELP borrowers to access the program and to ensure that PSLF would remain broadly available for public service workers with federal student loans. But a combination of failures by ED and the student loan industry have turned the key step of consolidation into a nearly insurmountable hurdle.
Too many public servants have been knocked off track because of widespread illegal conduct by the student loan industry and negligence by the Department of Education.
The record shows that industry has blocked FFELP borrowers from consolidating their loans to pursue PSLF at every turn, and that ED has for years either ignored this problem or not been capable of addressing it. The results are stark: the Department of Education recently indicated that “close to half” of borrowers rejected from PSLF for a lack of qualifying payments have been in repayment for 10 years or more but lost progress due to the timing of the consolidation of FFELP loans into Direct loans.
The historical record makes clear that the hurdles FFELP borrowers face when pursuing PSLF are far from an accident. Instead, they are the result of intentional choices by industry—and willful ignorance by ED. Milestones in the ongoing history of challenges facing FFELP borrowers include the following:
- Active, intentional steering of FFELP borrowers away from PSLF by the student loan servicer ACS led to legal action. In 2019, the New York Department of Financial Services and New York Attorney General took action against the student loan servicer Affiliated Computer Services (ACS), formerly a division of Xerox, for tricking public service workers out of their right to PSLF. As the consent order in this matter explained, “ACS managers directed representatives not to provide information on PSLF eligibility criteria to borrowers who contacted ACS seeking information about the program.” This conduct robbed borrowers of months or years of progress toward PSLF.
- Recent examinations from the Consumer Financial Protection Bureau confirm that lenders continue to withhold information about how FFELP borrowers can begin pursuing PSLF. In particular, the Bureau found that FFELP loan holders will tell borrowers that their loans do not qualify for PSLF without going on to explain that consolidating into a Direct loan will remedy that situation. FFELP loan holders have an incentive not to share this information because only one servicer, PHEAA, is tasked with servicing all loans owed by borrowers pursuing PSLF, meaning that the FFELP servicers will lose business if it follows the law and transparently informs borrowers of their rights.
- Extensive misdirection and lies by the student loan servicer Navient around PSLF culminated in a settlement with the American Federal of Teachers. In 2020, the massive student loan servicer Navient settled Hyland v. Navient, a class action lawsuit brought by members of the American Federation of Teachers (AFT). These teachers alleged that Navient lied to them about their eligibility for PSLF, costing them years of lost payments toward promised loan forgiveness. Navient is the largest owner of FFELP loans, and it had previously been caught systematically pushing borrowers off the phone and often into inappropriate repayment options—regardless of what would be right for the borrower—so that the company might pad its profits. As part of this settlement, Navient agreed to reform its approach to communicating with public service workers about PSLF.
- ED failed for years to step in to stop FFELP servicers from harming and misleading borrowers. Additional investigative work by the SBPC and AFT uncovered previously sealed government records indicating that ED chose not to act on behalf of FFELP borrowers in the face of mounting evidence of industry abuses. In particular, a report by the SBPC and AFT showed that ED failed for more than a decade to provide any regulation, guidance, or direction to student loan companies that advise public service workers about their right to PSLF. This failure allowed student loan servicers to continue knocking tens of thousands of borrowers off track from PSLF due to technical tricks and traps that ED could have easily solved. Moreover, this failure happened even when other government agencies, such as the GAO, were warning that student loan servicers faced financial incentives that might lead them to misdirect borrowers to support their own bottom line.
Of course, underlying these lawsuits and reports are thousands of borrowers who hoped to get debt relief for their many years of public service, but were ultimately led off track. Below are stories from FFELP borrowers who have been left behind by the PSLF system, and who in many cases have often been forced to pay well over the loan amounts originally disbursed to them:
Benjamin S., Chicago, IL:
I have been in the PSLF program since I graduated in 2011. I have always made my payments on time. Due to negligence by Navient to inform me that my loans with them were not in the right category for PSLF, despite me contacting them and Fedloan Servicing numerous time I had to refinance my loans with fedloan from FFEL loans into a Direct Federal loan after 4 years of what would be qualifying repayment. Not one person reviewed my account and informed [me] of . . . that despite processing information for PSLF. I lost 4 years of payment eligibility on all but $7,500 of nearly $80,000 in loans. The loopholes and confusion in this system are nearly impossible to navigate. . . .
It is extremely distressing to know that despite paying over $50,000 back of the money I borrowed, I still owe $17,000 more than I started with and there is uncertainty that the deal I entered for loan repayment will be honored.
It is time to simplify this system and make right all the errors of this past system.“
Stacey E., Mesa, AZ:
I have dedicated my life to public service. I have worked in the education field for my entire career, only taking jobs with public universities. I am a first generation college graduate. I come from a family that was unable to provide for my education, so I put myself through college and two graduate programs (at state schools) with scholarships, part and full time work, and student loans. . . .
I was so grateful when the PSLF program was announced. Upon hearing about it, I immediately called my loan servicer, which (at the time) was Great Lakes. The person I spoke to assured me what while they didn’t have specifics on the program yet, that [I was]certainly “on track” to qualify. As more details became available, I called Great Lakes many more times to ensure that I was going to be able to qualify for this program. Obviously, I wanted EVERY payment I made to qualify. The reps always assured me [I was] “on track” and not to worry.
When the Department of Education finally released the Employment Certification Forms in 2012, I downloaded these and had my employer immediately certify my employment. At that point, I had been making income adjusted payments for over four years. When I got my response back, I was heartbroken. The form said that NONE of my payments counted towards PSLF. I called great lakes who informed me that I “had the wrong kind of loans.” I honestly had no idea that there were different kinds of loans at that time. I learned that I had FFEL loans, and not Direct loans. . . . At this point, the program has been a colossal administrative failure.”
Douglas R., Media, PA:
The Public Service Loan Forgiveness program is a primary reason I chose to work for a state government agency after graduating with approximately $200,000 in debt. However, due [to] the logistics of the program, I have missed out on qualifying payments.
1. Because only certain types of loans qualify, I had to reconsolidate several of my loans in order to qualify. But no one told me this up front, so I lost my first 4-6 payments on my loans that were originally FFEL loans . . .
2. The transfer of loan information from one servicer to another is highly inconsistent and prone to error. My loans were serviced by ACS (which is now defunct) before they were transferred to FedLoan when I began PSLF. However, FedLoan told me that their computer couldn’t read some of the information from my previous servicer’s computer records, so I did not get credit for those payments. When I tried to rectify this, I could not provide records because ACS was already shut down, and I could no longer access my account.”
The Biden Administration has the tools to deliver PSLF to FFELP borrowers—and it must act quickly.
It’s time for President Biden and Secretary Cardona to restore the promise of PSLF for FFELP borrowers.
The SBPC organized a broad coalition of organizations representing workers, servicemembers, veterans, civil rights groups, and faith communities in an April letter calling on ED to restore the promise of PSLF using these tools. This letter echoed similar demands that have been sent to ED by labor unions representing more than ten million public service workers, 56 members of Congress, and 16 Military and Veteran Service Organizations. Moreover, they reflected statements by Secretary Cardona himself, who called it “a priority” for the Education Department to “revisit” past failures in its management of PSLF, and who noted that ED has “the authority to revisit that and make sure we’re honoring those who choose to engage in public service by providing loan forgiveness in a way that is a lot better than two percent approval.”
The time for half-fixes, band-aids, and temporary expansions is over. The Biden administration must take bold action using tools already at its disposal to restore the promise of PSLF for public service workers who owe on or once owed on FFELP loans.
Do you have an older federal loan that is not eligible for PSLF and did you get bad or no information from your student loan company about how to become eligible for PSLF?
We are urging FFELP borrowers: it’s time to raise your voices, share your stories, and call for President Biden and Secretary Cardona to deliver promised debt relief to student loan borrowers who have committed their careers to the public service. Ten years working in public service is ten years and public servants’ loans should be forgiven, including for borrowers with FFELP loans. Together, borrower stories can help make this a reality.
Share your story here.
Amy Czulada is the Outreach & Advocacy Coordinator at the Student Borrower Protection Center. Previously, Amy was a Research Analyst at 32BJ SEIU in New York City.
Ben Kaufman is the Head of Investigations and a Senior Policy Advisor at the Student Borrower Protection Center. He joined SBPC from the Consumer Financial Protection Bureau where he worked as a Director’s Financial Analyst on issues related to student lending.