Last December, four student loan borrowers sued the Department of Education. These borrowers claim the Education Department cheated them out of the Public Service Loan Forgiveness (PSLF) program. The borrowers, who had received approval from their loan servicer to participate in PSLF, claim the Education Department retroactively denied their eligibility for the program.
The Education Department has told borrowers that they cannot rely on FedLoan Servicing to say whether they qualify for student loan forgiveness under the PSLF program. FedLoan Servicing is one of several student loan servicers working on behalf of the Department of Education. It is also the only servicer that handles loans enrolled in the PSLF program. The Education Department claims only it can decide who is eligible for loan forgiveness.
Signed into law by President George W. Bush in 2007, the PSLF program allows borrowers with federal Direct loans who are working in eligible public service jobs to receive tax-free loan forgiveness after making timely payments for 10 years. If PSLF stays intact, the first wave of borrowers will receive loan forgiveness this year.
Will the Education Department Uphold PSLF Forgiveness?
Hundreds of thousands of borrowers have enrolled in the PSLF program under the assumption they could receive tax-free loan forgiveness. Many of these people made major life decisions based on this assumption, such as which careers they would seek after college.
Not only has the Education Department signaled that it may revoke PSLF approval for some borrowers, the 2018 White House budget called for the elimination of the program. Understandably, borrowers enrolled in PSLF are scared. Some of these borrowers are law school graduates with more than $100,000 in student loans. As a recent article in NPR states, the future of the PSLF program is “up in the air.” As of right now, it is impossible to determine what could happen to the PSLF program under the Trump administration’s Education Department.
The Kansas City bankruptcy attorneys at The Sader Law Firm can help student loan borrowers find helpful repayment options and other solutions to manage higher education debts.