The perilous gap between the lofty goals of student loan forgiveness – and the fine print

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Elizabeth Starr is not rich, but she belongs to a rarefied 1%.

Starr, a 60-year-old community college English teacher who lives in Bloomington, Indiana, had her student loans canceled earlier this year under the Public Service Loan Forgiveness program. The initiative allows borrowers working for government and certain types of nonprofit organizations to have their federal student loans canceled after 10 years of payments.

About 28,000 borrowers have requested a forgiveness in recent months, the first time it was available under the program, and only 96 have had their loans canceled, according to the Education Ministry.

Jacquelyn Anderson was among the 99% of borrowers who were refused forgiveness. The 39-year-old accountant who lives in the Atlanta metro area worked for a quasi-government organization and had paid off her federal student loans for more than 10 years. But after submitting his documents last fall, Anderson discovered that his loans were not eligible for release under the program.

Not all public service jobs are eligible. Borrowers working for all levels of government and 501 (c) (3) nonprofits are clearly eligible, but the status of borrowers working for other types of employers is more murky.

Their divergent histories illustrate the gulf between the lofty ideals surrounding the PSLF and the fine print. To be eligible, borrowers must have the right type of federal loan and repay their debt under the right type of repayment plan (not all federal student loan repayment plans qualify) for at least 10 years.

(Learn more about how to qualify for PSLF here).

In addition, not all civil service jobs are eligible – borrowers working for all levels of government and 501 (c) (3) nonprofits are clearly eligible, but the status of borrowers working for d “other types of employers is more murky,” said Betsy Mayotte, president of the Institute of Student Loan Counselors.

Despite this long list of specific requirements, Mayotte said it encountered borrowers who “kind of have this vague understanding that after 10 years my loans are gone. They haven’t done any research to see that this is an actual program.

At the same time, student loan companies, government and others charged with implementing the PSLF have not done a sufficient job, especially in the early years of the program, in spelling out the conditions for eligibility for borrowers, Mayotte said.

Given all of this, the confusion over the program during its first year of offering a pardon is not surprising. “You can kind of see this coming from a mile away,” said Persis Yu, director of the National Consumer Law Center’s Student Loan Borrower Assistance Project.

Here’s how two borrowers with different fortunes navigated the program’s eligibility requirements:

What they first heard about the program and how they followed it up

Starr says she doesn’t remember exactly when, but at some point, maybe a few years after the program started, “we started hearing about this utility loan forgiveness case.” But she delayed confirming her eligibility for a few years because she feared she would not qualify.

Anderson assumes that she first heard of the PSLF in 2008. At the time, Anderson understood that the parameters of the program meant that if you had federal student loans and worked for the government or a profit organization. non-profit, your loans would be canceled after 10 years. of payments. Anderson felt her situation matched the bill – she worked as an accountant for an organization primarily funded by taxpayers’ money and run by a mix of elected officials and appointed citizen members.

“I was like, ‘I think I’m on the right track.'”

Elizabeth Starr and her husband.

Courtesy of Elizabeth Starr

How the requirements affected them

Sadly, Anderson was not on the right track. She had Federal Family Student Loans, the type of federal student loan that does not qualify for the PSLF. Borrowers benefiting from these types of loans can consolidate them into a direct loan and become eligible for the program. Although Anderson said she spoke to her duty officer about her interest in the program, she never received this advice. She says she also later found out that she was on the wrong type of repayment plan.

It was “two tights right there, one way or another that weren’t released, or I misunderstood,” she said. “I just feel like the information hasn’t been widely disseminated.”

Jacquelyn Anderson struggled to get her PSLF loans canceled.

Courtesy of Jacquelyn Anderson

Starr, on the other hand, was fortunate to have the right kind of loan and the right payment plan, before the program even existed, she said.

When she started paying off her graduate loans in the early 2000s, Starr chose an income-based repayment plan – the only one available at the time that would later qualify for the PSLF – because she hoped that part of his debt would be paid. day and an ICR plan promised forgiveness after 25 years of payments.

Starr also consolidated its loans into direct loans, the type of loans eligible for the PSLF, in 2001, long before the program existed. “It had nothing to do with me, these are loans that I got,” she said. “I don’t know why I got so lucky.”

What happened when they filed their forgiveness requests

Even before filing a loan forgiveness request, Starr was relatively confident she would receive it. In 2015, Starr sent out an Employment Certification Form, a document that first became available in 2012 that allows borrowers to confirm they are on track for the PSLF and see how many payments they performed for forgiveness.

Elizabeth Starr said she was nervous the entire time she waited for her public service loan forgiveness application to be approved. In the end, Starr was forgiven for around $ 37,000.

Starr’s duty officer confirmed that she made around 86 qualifying payments over those seven years, which would put her on track to have her loans canceled just over 10 years after the program started. .

A few years later, Starr got an idea of ​​how scarce a position she was in. She called her service agent to check on something else and the rep on the other end of the phone looked shocked that she only had one payment. left before his loans were canceled. (Starr had already submitted his request for forgiveness).

“The woman on the phone started to panic. It was like the first time she had seen him, ”Starr said.

Despite this evidence, Starr said she was nervous the entire time she waited for her PSLF application to be approved. “It was so terrifying,” Starr said, adding that she feared “there would be something I would have to prove that I wouldn’t be able to prove.”

In the end, Starr was forgiven for around $ 37,000.

“They reset everything, they make it look like the loan never existed, there is no payment history, they just erase it,” she said.

Four months after submitting her loan forgiveness request, Jacqueline Anderson got her answer: her debt would not be forgiven because she did not have the right type of loan and was on the wrong repayment schedule.

Although she paid off her loans for 10 years and worked in what she believed to be a public service job, Anderson did not pay off her loans.

As soon as the Department of Education released the loan forgiveness request last year, Anderson filed it and waited. She had never submitted an ECF in the past because she had only heard about it about 18 months ago and was confident that she was eligible for the program.

About four months after she filed her loan forgiveness request, Anderson got her response. Her debt would not be canceled because she had the wrong type of loan and was on the wrong repayment schedule.

His reaction: “It was like, oh, I felt so bad, but at the same time I wasn’t surprised,” Anderson said. She was so skeptical that she would never receive the program’s promise of forgiveness that she had already started spending extra money on her debt to clear it faster.

How forgiveness – or the idea of ​​it – affected their lives

For Starr, the most practical implication of canceling her loans is that it freed up extra money for her to spend on her mortgage so that she can pay it off before she retires.

“I feel really grateful, but I also feel a little outraged that it’s so difficult,” Starr said of Public Service Loan Forgiveness. “Some of the things that worked in my favor were just luck.”

Anderson wasn’t so lucky and unfortunately she had structured her life in a certain way around the idea that she would have her loans canceled. She never moved to a more lucrative job in the private sector to preserve her eligibility for loan cancellation.

The experience of organizing his life around the PSLF only to be rejected left Anderson feeling that there was a disconnect between the stated goals of the program and the reality of who it is helping. Anderson said she started putting more money into her loans because “I just knew it was too good to be true.”

How Debt Affected Their Lives

While debt cancellation certainly makes a difference to Starr, she has struggled under the weight of her loans. Starr and her husband couldn’t afford a modest condo until “late in life,” she said, and it’s still furnished with some of her graduate furniture.

“Look at my life,” she said. “I’m 60 years old and just finished paying off student loans because of it. We’re living well, I’m not complaining, but it kept us from having a middle class lifestyle that we could, should have had with the jobs we had, ”she said.

For Anderson, her student loan debt means she’s living on a “shoestring budget” for much longer than expected and giving up on tangible lifestyle changes, like a more reliable car. But she is perhaps more concerned with the psychological burden created by the debt.

“Now that I have a daughter who is starting her freshman year in college, I am doing everything in my power so that she does not have to take out student loans,” she said.

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