Did The Government Just Lie About Student Debt Forgiveness?

graduating students

Just when we thought we heard enough lies from our government, could it be that they strike again?  Let’s hope that this is only more fake news.  

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More than 550,000 people have signed up for a federal program that promises to repay their remaining student loans after they work 10 years in a public service job.

But now, some of those workers are left to wonder if the government will hold up its end of the bargain — or leave them stuck with thousands of dollars in debt that they thought would be eliminated.

In a legal filing submitted last week, the Education Department suggested that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said.

The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts.

Four borrowers and the American Bar Association have filed a suit in United States District Court in Washington against the department.

The plaintiffs held jobs that they initially were told qualified them for debt forgiveness, only to later have that decision reversed — with no evident way to appeal, they say. The suit seeks to have their eligibility for the forgiveness program restored.

“It’s been really perplexing,” said Jamie Rudert, one of the plaintiffs. “I’ve never gotten a straight answer or an explanation from FedLoan about what happened, and the Department of Education isn’t willing to provide any information.”

The forgiveness program offers major benefits for borrowers, advocates say, to the point of persuading some people to take public service jobs instead of more lucrative work in the private sector. The program generally covers people with federal student loans who work for 10 years at a government or nonprofit organization, a diverse group that includes public school employees, museum workers, doctors at public hospitals and firefighters. The federal government approved the program in 2007 in a sweeping, bipartisan bill.

About 25 percent of the nation’s work force may qualify for the program, the Consumer Financial Protection Bureau estimated. Eligibility is based on a borrower’s employer and whether it meets the program’s rules, not on the specific work an applicant does.

On its website, the Education Department directs borrowers who believe their employer qualifies to submit a certification form to FedLoan. If the form is approved, the Education Department transfers the borrower’s loans to FedLoan, which collects payments and tracks the borrower’s progress toward the 120 qualifying monthly payments they must make before the remaining balances will be forgiven.

Only a small fraction of the millions of workers who might qualify for the program have begun the process of using it. Fewer than 553,000 borrowers have submitted at least one certification form to FedLoan and received its approval, according to Education Department data. Borrowers are encouraged to submit a new certification form each year.

But some of those approved borrowers might get bad news because it is unclear whether the certifications are valid.

Mr. Rudert submitted the certification form in 2012 and received a letter from FedLoan affirming that his work as a lawyer at Vietnam Veterans of America, a nonprofit aid group, qualified him for the forgiveness program. But in 2016, after submitting his latest annual recertification note to FedLoan, he got a denial note.

The decision was retroactive, he was told. None of his previous work for the group would be considered valid for the loan forgiveness program.

What changed? Mr. Rudert said he did not know. After filing a complaint with the Consumer Financial Protection Bureau, he received a reply from FedLoan saying that his application “had initially been approved in error.” He has not been told what the error was, and has not found any way to appeal the decision.

Mr. Rudert and the American Bar Association filed their suit in December, alleging that the Education Department acted “arbitrarily and capriciously” in making its decisions about which employers qualified.

Last week, the department filed a reply that said that FedLoan’s responses to borrowers’ certification forms cannot be trusted.

A FedLoan approval letter “does not reflect a final agency action on the…

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