Student Loan Forgiveness Program May Not Be So Forgiving

If you are part of a student loan forgiveness program that will forgive your students loans after work in public service, you should pay close attention to this emerging story.  More than 550,000 borrowers have signed up for the program, but now some are wondering if the government will hold up its end of the bargain or if they will be left with a large amount of unexpected debt.

In 2007, Congress approved a sweeping bipartisan bill that overhauled the federal student loan program.  One part of that legislation is a loan forgiveness program that will forgive the balance of a borrower’s student loans, provided that the borrower works 10 years in public service.  Generally, the program covers people who have federal student loans and work for 10 years at a government or non-profit organization.  No one has had their loans forgiven under this program, as the first wave of qualified workers are eligible to submit applications for debt forgiveness in October.

Lawsuit Against Dept. of Education

Four borrowers and the American Bar Association have filed a suit against the Department of Education in United States District Court in Washington.  The Plaintiffs in the suit were told they qualified for loan forgiveness under the program, only to later have the decision reversed.  In a legal filing last week, the Education Department stated that student loan borrowers can not rely on the approval letters sent by the program’s administrator, FedLoan servicing.  The Department said FedLoan’s approvals are tentative.  In the suit, one plaintiff attorney had gotten approval letters for several years affirming that his work at a non-profit qualified for forgiveness, only to be denied in 2016 for doing the same work.  He was told that the denial was retroactive and that none of his previously approved work counted toward the 10 years.

Tips for Student Loan Forgiveness Borrowers

Forbes has some tips for borrowers who work in public service or plan to work in public service need to know moving forward. First, borrowers need to understand how public loan forgiveness works.   Secondly, people should understand that the lawsuit described above involves individual people with specific circumstances- your situation might be completely different.  Third, Forbes suggest to choose your employer and type of employment carefully.  Your employer or specific role might not qualify under the program.  Hopefully, the Education Department will provide more guidance as to what non-profit work qualifies as it starts to forgive student loans this year.

Forbes also suggests to not enter public service if your reason is primarily student loan forgiveness.  It is possible that the rules may change and that the program might look different than when you start your public service career.  To that point, President Trump made some proposals during his campaign that he might try to implement some changes to the student loan program.

As we have previously discussed on the blog, student loan debt is such a problem for many of us.  If you are need to discuss your student loan debt with a qualified attorney, please make an appointment at one of our Bond & Botes offices to set up a free appointment.