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Media Domino: A Blog About Student Debt Why FFEL Borrowers Are Routinely Denied Access to PSLF

Why FFEL Borrowers Are Routinely Denied Access to PSLF

By Tariq Habash | December 22, 2020

Today, we released a new report as part of our joint investigation into abuses and breakdowns across the Public Service Loan Forgiveness (PSLF) program. This report looks at the fate of public service workers who owe older federal loans made by banks and other private lenders and guaranteed by the federal government under the Federal Family Education Loans Program (FFELP). Over the last decade, public service workers with these older loans who are pursuing PSLF have been rejected by the U.S. Department of Education more than 70,000 times for having a so-called “ineligible loan.”

Read the report: Broken Promises: How the Department of Education’s Failures and Industry Abuses Deny FFEL Borrowers Public Service Loan Forgiveness

When Congress created PSLF in 2007, it granted public service workers who owed these federally guaranteed student loans the right to pursue PSLF. To exercise this right, borrowers had to work with their student loan servicers to convert these older loans into a newer type of student loan owned by the federal government, known as a Direct Loan. Our investigation found that the Department of Education (ED) empowered big banks and other private-sector companies that own or service FFELP loans—who stood to lose money if hundreds of thousands of public service workers pursued PSLF—to mislead teachers, nurses, and servicemembers about their rights and enrollment options. At any point over the past 13 years, the Department of Education could have compelled these companies to help their customers, but instead the Department looked the other way as borrowers were set up to fail. 

Exposing a Decade of Mismanagement and Abuse

Our investigation sought government records from the Department of Education and several student loan companies that were chartered by state governments to make loans through the FFEL Program—firms that have a legal duty to comply with state open records laws. These requests, along with a review of court filings, consumer complaints, and other public information, revealed that: 

  • For more than a decade, the Department of Education has failed to provide any regulation, guidance, or direction to student loan companies that advise public service workers about their right to PSLF. As of October 2020, more than three years after the first applicants were denied PSLF and 13 years after the onset of the program, the Education Department has never placed an affirmative duty on the student loan industry to tell borrowers with FFELP loans about the availability of PSLF or the steps necessary to get on track to receive loan forgiveness. The Department’s official response stated:
  • In the absence of guidance and regulation from the Department of Education, student loan companies’ practices were driven by an economic conflict of interest that encourages deception and abuse. When a public service worker invokes his or her right to convert an older federal student loan to pursue PSLF, creditors and loan servicers that handle these older loans will lose all future revenue from that individual. Facing the prospect of thousands, tens of thousands, or millions of borrowers eligible to invoke their rights, executives needed to confront a new economic reality posed by this potential loss in revenue. This economic conflict of interest encourages student loan companies to deceive or mislead borrowers about the right to loan forgiveness.
  • The Department of Education continues to ignore mounting evidence of mismanagement and abuse by companies managing older federal loans guaranteed by the federal government. Our report reviewed a wave of recent lawsuits, including actions filed by government enforcement officials and regulators, that allege companies that handled or are handling FFELP loans systematically derailed borrowers’ efforts to pursue PSLF. As one state regulator explained in an enforcement action against a large student loan company:

Yet, there remains no evidence in the public record that, since PSLF’s creation, the Department of Education has ever taken any action to ensure companies handling FFELP loans assist borrowers working in public service—a clear signal from the Department that the rights of public service workers need not be a priority. 

Based on these findings, we are calling for sweeping reforms across the student loan system to obtain justice for the public service workers caught in this scheme.

Demanding Justice for Public Service Workers

Through a series of specific actions by the Secretary of Education, Congress, and the federal and state law enforcement community, these borrowers can still realize the promise of PSLF—but only if stakeholders at every level of government act to protect public service workers who borrowed FFELP loans.

  • The Secretary of Education should ensure that past and present borrowers with loans made through the FFEL Program are able to get credit for public service. To address the systemic problems identified in this report, the Secretary must ensure all current and former FFEL borrowers are able to get credit for any payments made since 2007. The Department recently acknowledged that it has taken these steps before for select borrowers, granting credit for PSLF to borrowers when they were misled by a student loan company about having the wrong type of loan. But these piecemeal efforts are wholly inadequate—these actions were conducted through a secret appeals process that fails to address the magnitude of the breakdowns affecting borrowers across the program.
  • Congress should fix the PSLF program to ensure the Department is required to retroactively count all FFEL borrowers’ past qualifying payments. Congress must respond to the failures by industry and the Department of Education by legislating a permanent accommodation for FFEL borrowers to ensure that their loans—and their years of qualifying public service work—will finally be recognized. There have been a number of legislative proposals to achieve this goal, including, notably, the What You Can Do For Your Country Act. Recognizing the central role that public service workers have played in America’s pandemic response, a variation of this approach was also included in COVID-19 relief legislation passed by the House of Representatives in October 2020. 
  • Law enforcement officials, regulators, and the Department of Education must investigate abuses by the student loan industry and, where findings confirm abuses occurred, the Secretary of Education must cancel student debt. Federal and state law enforcement officials must continue investigating the specific abuses endured by public service workers who owe or owed FFELP loans stretching back to the creation of PSLF in 2007. Officials must immediately take comprehensive steps to independently audit the FFEL Program and assess whether private-sector student loan companies have improperly denied borrowers’ rights under the Higher Education Act. Where findings confirm that borrowers were improperly deterred or denied their rights, the Secretary of Education must immediately provide relief by cancelling student debt on a class-wide basis for all affected borrowers.

It is not too late to protect the teachers, nurses, and other public service workers who have served our communities, only to be denied their rights under the law. By taking these immediate actions, policymakers and law enforcement officials can undo the damage caused by a decade of government mismanagement and industry abuse and deliver on the promise of the Public Service Loan Forgiveness program.



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, leaving millions denied or delayed access to this critical program.

According to the Department of Education, the Public Service Loan Forgiveness program continues to have a nearly 98 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 rampant mismanagement and industry abuses undermining the Public Service Loan Forgiveness Program.Building on the work of regulators, law enforcement officials, government watchdogs, and private litigants, this investigation has exposed government mismanagement and industry abuses when borrowers attempt to certify that they work in public service. Recently the investigation also uncovered millions of servicing errors by Affiliated Computer Systems, the former sole servicer of PSLF-eligible loans, affecting at least 1.3 million borrowers.

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