Hooray! Government Forgave 96 People's Student Loans! Out Of 28,000 Applicants.
Excellent news for folks with student loans who went into public service with the anticipation that they'd get their loans paid off through the "Public Service Loan Forgiveness" (PSLF) program, which began back in 2007. The very first batch of graduates who took the loans and followed all the rules has finally been processed, and the program is paying off! For exactly 96 of the 28,000 people who applied last year. That's a whopping 3/10ths of a percent success rate, and proof that if you make a government program Kafkaesque enough, you can avoid having to actually fulfill any of what the suckers thought you'd "promised." Let's just hope Trump doesn't figure out how to apply that logic to Social Security and Medicare.
The loan forgiveness program was signed into law by George W. back in 2007 to encourage idealistic young folks to ask what they could do for their country -- yes, really, even though it sounds like such a Barack Obama kind of thing. The idea was to give college students an incentive to get jobs in the public and nonprofit sectors at a time when lots of talent was going to private industry. Unfortunately, the federal Department of Education threw up so many hoops to jump through that hardly anyone actually qualifies for getting their loans forgiven, even though applicants may have thought they were following the rules all along. That's a neat trick, as MarketWatch explains:
More than 70% of the borrowers whose applications were denied didn't meet at least one of the eligibility requirements for the program, according to the government's report. To qualify for a loan discharge under PSLF, a borrower must have Direct Loans — a specific type of federal student loan — be in the correct repayment program (many of the government's repayment programs don't qualify for PSLF), and work in the correct type of job, which includes government work and employment at certain types of nonprofits.
And then there's the repayment rigamarole: To qualify, a borrower must make 120 payments (in the right repayment program, mind you) to qualify for forgiveness. EASY! Just 10 years of a flawless payment record. How hard is that? Oh, lookie:
For example, when borrowers put more than their required monthly payment towards their loan, typically the due date for their following payment is more than a month later than when they overpaid. This is known as paid-ahead status. Any payments borrowers make while they're paid ahead don't qualify for PSLF.
Good for you, paying a little extra! Oh, but that pushed back your due date, so that other payment you made put you farther ahead, and now you're all out of whack, and how many more payments do you actually need to qualify? As journamalist Adam Weinstein notes on the Twitters, his own attempt to get student loan traction was derailed when he found out his school and loan servicer had generously given him a six-month deferment, "automatically," which he hadn't wanted, and so the six payments he made during that period didn't count toward the 120 payments needed. Surprise!
For people who may have made career decisions based on the assumption that they'd just follow the rules and get their loans forgiven, and isn't America the greatest, this has to come as a bit of a surprise! Clare McCann, deputy director for higher education policy for the New America Foundation, said,
It's obvious that a huge number of people that couldn't meet the requirements did not understand that they weren't meeting the requirements [...] The complexities in the program's design mean that there are going to be a lot of people who think they're eligible for PSLF and they're not.
Bummer. In addition to the applications that were deemed ineligible -- 28,624 of them! -- there's another slice, 28 percent, that were rejected as "incomplete" in one way or another. Those borrowers can at least resubmit their applications and try again, huh? It couldn't hurt to staple your revised application to a yacht and have it delivered directly to Betsy DeVos. Also, there's at least some hope that the low number of successful applications this year -- the first year anyone's been eligible -- will improve as more people move through the eligibility process.
Still, bringing some sanity and better transparency to PSLF -- and student loans in general! -- might be an awfully smart thing for Democrats to run on. Loan forgiveness still sounds like a terrific idea made unworkable by too many hurdles thrown into the system, and a working loan forgiveness program would definitely be better than the Republican alternative. House Rs earlier this year introduced a bill to scrap the program altogether, because who needs government or nonprofit workers anyway?
Of course, there's also a hell of a lot to be said, going forward, for providing free college to everyone, but only crazy people think that would ever work, since we have to give the already wealthy another tax cut. Plus those free business jets. If only there were some sort of pocketbook issue that could get people out to vote for Democrats, huh?
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