Public Service Loan Forgiveness Issues and Potential Changes to the Program

Melissa Maichle ., Federal Student Aid Programs, Financial Aid Industry News, General Issues in Financial Aid


Public Service Loan Forgiveness (PSLF) has been a controversial program ever since it was introduced in 2007.  Here is a summary for college financial aid offices.

Is this potentially the end of the program?

PSLF promises student borrowers who have made ten years of on-time payments and taken up a job in the non-profit sector, their loans would be forgiven.  PSLF has been so dubious that Republican lawmakers have put the program in their sights for elimination in 2018 under new legislation that has been proposed.

Confusion and Misinformation Over Qualifying Loans

Since the program has now entered the age at which students can possibly begin to have their loans wiped out, many are finding out the hard way that their student loans never qualified for the program to begin with.  A confusing piece of the legislation never included “private lender” federal loans, known as Family Federal Education Loans (FFEL).  While the PSLF program was implemented under the Bush administration in 2007, the Obama administration was the one who moved all federal loan programs to the current Direct Loan format in 2010.  So any federal student loans taken out prior to 2010 needed to be consolidated, at which point payments made on the new consolidation loan would begin to count towards the PSLF requirement.

Students have begun fighting back, especially those that have talked to their student loan servicers over the years and been told that all was OK.  One of the attorneys for these students is attempting to turn it into a class-action lawsuit to cover all borrowers who may be impacted.  In June, the Consumer Financial Protection Bureau issued a report spotlighting complaints from borrowers claiming they had not received accurate information from their loan servicers about the program even after identifying themselves as a public worker.

“When the companies responsible for delivering on this promise aren’t up to the task, our dedicated public servants shouldn’t have to pay the price,” said CFPB Student Loan Ombudsman Seth Frotman at the time.

A Call to Strengthen PSLF

Some congressional members are opposed to doing away with PSLF and actually look to strengthen the program moving forward. Pennsylvania House rep Brian Fitzpatrick has doubled down on calls to cancel the program.  “I think that would be ill-advised. It would send the wrong message,” he said. “We need to be doing the opposite; we need to encourage kids to go into those professions.” Fitzpatrick is also pushing a new bill that would strengthen the program which pays off student loans of public workers — while also closing a loophole that has made some public workers think they were enrolled in the program but really weren’t.

“Now more than ever, we need people entering the public service professions,” he said. “We need school teachers, we need social workers, people in the military, we need to encourage our students to enter these professions. The only way we can encourage that is give them assistance with their loans repayment. It’s really important … I think it’s a great investment in our country.”