Natalie Korman
August 2017

Uncertainty Continues with Public Service Loan Forgiveness Lawsuit

Several lawyers and the American Bar Association (ABA) are suing the Department of Education (DOE) over a dispute regarding the department’s Public Service Loan Forgiveness program.

The plaintiffs in the suit believed, based on paperwork they received from their loan servicer, that they qualified for the PSLF program. They subsequently received notices that their qualification approvals were revoked. The disqualification was, the DOE says, because their employers did not meet department criteria. The plaintiffs are employed by the ABA as well as two other organizations.

PSLF was initiated by Congress in 2007. The first participating borrowers are reaching the end of a decade in public service that they hope will result in the forgiveness of their remaining student loans. Many will likely still receive this debt relief, but others’ fates are yet unresolved as the lawsuit continues.

While the lawsuit deals with the employment requirements, a few more important requirements for borrowers include:

  • At least 10 years of qualifying payments on a federal direct loan: specifically, 120 unique payments concurrent with employment with an approved organization
  • Employment with a qualifying organization:e. U.S. government, 501(c)(3) nonprofits, and other nonprofits that benefit the public under the DOE guidelines
  • Submission of Employment Certification form to FedLoan Servicing (the dedicated servicer for PSLF loans); suggested annual submission to ensure qualification

A motion by the DOE says that any Employment Certification forms approved by FedLoan Servicing are “interim-non-binding” decisions and that final decisions are made only after a borrower has made the 120 necessary payments towards their loan.

Even though many nonprofits and public sector entities are safe from disqualification, the revelation of this recent motion could be disconcerting for borrowers who thought their employers were approved. It may be especially troubling for those who have made significant life decisions based on the expectation that their remaining student loans would be forgiven after 10 years.

Meanwhile, the future of the program itself hangs in the balance: The Trump administration states that it may move to cut the program altogether. Many in both the public and private sectors have spoken out in favor of keeping it. Congressmen Brendan F. Boyle, D-Penn., and Ryan Costello, R-Penn., have formed the Public Service Loan Forgiveness Caucus, a bipartisan initiative to encourage fellow “lawmakers [to] ensure the survival of the program.” The Congressmen say they want to prevent debt from “making one’s desire to serve his or her community unattainable.”

There is no mention of the lawsuit against the DOE in either Boyle’s or Costello’s online statements.

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Natalie Korman

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