Why Many Early PSLF Borrowers May Not Receive Student Loan Forgiveness

Posted on October 2, 2017 at 12:00pm by
Are changes coming to student loans?

Will PSLF borrowers be eligible for forgiveness?The Public Service Loan Forgiveness (PSLF) program was passed by Congress and signed into law by President George W. Bush in 2007. This program allows borrowers with specific types of federal student loans and public service jobs to receive tax-free loan forgiveness after 10 years of consecutive payments.

Many of the first borrowers who enrolled in PSLF after its creation are nearing the point where their loans could be forgiven. However, the Department of Education has signaled many people who have made these payments will not qualify for forgiveness.

When PSLF was created, many borrowers who enrolled did not have the type of federal student loans that are eligible for forgiveness. Before 2010, many borrowers were still using FFEL Loans, which are not eligible for forgiveness under PSLF. For the past ten years, these borrowers made payments towards PSLF under the assumption that they were eligible. Unfortunately, they may be in for a rude awakening.

CNN recently published an article discussing an Oklahoma public school teacher’s plight with the PSLF program. The teacher had accumulated $37,000 in student loans after graduating. However, due to compound interest, her current balance has ballooned to $75,000. For the past ten years, she had made payments towards the PSLF program. She expected to have the remaining balance forgiven. Only very recently did she find out that her loans were never eligible for PSLF in the first place. The teacher consolidated her student loans into a Direct Consolidation Loan, which are eligible. Unfortunately, the teacher will have to restart the 10-year repayment period. Many other early PSLF enrollees are about to experience the same scenario.

What Student Loans Are Eligible for PSLF?

You must have Direct Loans to be eligible for PSLF. These are loans that originate from the Direct Loan program. If you do not have Direct Loans but want to enroll in PSLF, then you should consider consolidating your loans into a Direct Consolidation Loan. This type of loan is part of the Direct Loan program.

You must also meet the strict employment criteria required to stay eligible for PSLF. The Department of Education has reiterated that only they can determine eligibility. Several borrowers enrolled in PSLF were told by their loans servicer that they were eligible. In these cases, the Department of Education retroactively revoked their eligibility.

If you are having problems paying back your student loans, then our attorneys could meet with you to discuss your situation. The Kansas City student loan lawyers at The Sader Law Firm can discuss options to help you manage repayment.



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4 Responses to Why Many Early PSLF Borrowers May Not Receive Student Loan Forgiveness

  1. ginny ginny says:

    I am one of those people nearing my 120 payments, who thought I had done my homework and was on track to get forgiveness. I qualify in EVERY way…I worked for a state university and currently for the federal government. I have the right kind of payment plan. My payments have all been on time. BUT….I didn’t know, and never saw it explained explicitly on any of the DOE websites, that there were a different type of older loan, FFEL, that didn’t qualify. I thought ALL government guaranteed loans qualified! Even if I had known, since I consolidated back in 2000, and I was told a couple years later I couldn’t ever refinance again unless I took out news student loans, I would not have even thought I had the option to refinance into a “Direct” loan. I didn’t know there was an exception made to refinance a consolidated loan to make it a “Direct” loan just to qualify for PSLF. So yes, I just got a rude awakening this past week. I actually cried. I do not think the DOE did their job in informing people about FFEL vs. Direct, or about the exception to refinance into a Direct loan when you otherwise could not, and I think they FAILED their duty and there should be a class action lawsuit of those affect, which I am sure are MANY of us.

  2. Hi, Ginny. Thank you for commenting. Unfortunately, it is expected that many borrowers who had been counting on PSLF will not be able to receive loan forgiveness. However, we encourage you to call us at (816) 561-1818 so we can answer any additional questions you may have about your student loans.

  3. Catherine Starke Catherine Starke says:

    I found out I am in the exact situation as Ginny above. I have 10 years of perfect payments to my FFEL loans, and when I submitted my application for PSLF, I was told then that I needed Direct Loans–a loan type that was not in existence when my loans were made. Neither MOHELA nor any of the school districts I have worked for ever informed me of this loan forgiveness and it’s qualifications

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