09.27.18

By:  Stacy Crowley
Source: New York Times

28,000 Public Servants Sought Student Loan Forgiveness. 96 Got It.

A program intended to wipe away the student loans of qualifying public servants has rejected more than 99 percent of those who applied, according to a government audit that found that “fragmented” management and “piecemeal” operating instructions had contributed to the failure to forgive more debt.

The Education Department said last week that 28,000 borrowers had submitted applications to have their debts canceled since the public service loan forgiveness program began accepting them a year ago. Only 96 were approved, the agency said. More than 70 percent were rejected for not meeting the eligibility requirements. Most of the rest had left necessary information out of their applications.

In its report on Thursday, the Government Accountability Office said major administrative failings had left both the program’s administrator and borrowers in a state of confusion about the program’s rules.

To get their remaining balances forgiven, applicants must spend at least a decade working for government agencies or certain types of nonprofit organizations; they also must make 120 qualifying monthly payments on their federal student loans. More than 1.2 million borrowers have sought to have their employment certified for eligibility in the program, the accountability office said.

But the precise requirements of the program, which was created in 2007, are complex, and the Education Department has never given a written instruction manual to the company hired to manage the program, according to the audit report.

That left the program’s administrator, the Pennsylvania Higher Education Assistance Agency, known as FedLoan, scrambling to figure out how to interpret policies and guidance that were often communicated to it haphazardly. In one case, Education Department staff emailed instructions to FedLoan that directly contradicted guidance given to the company by other agency officials, the report said.

FedLoan is unable to tell borrowers, who are “frequently confused” by the program’s requirements, whether their employment is eligible, company employees told investigators from the Government Accountability Office. And gaps in the way information about borrowers’ accounts travels between FedLoan and the Education Department’s other federal loan servicers have led to miscounts and other errors in tallying borrowers’ qualifying payments, investigators found. FedLoan said it relied on the borrowers to catch those mistakes.

Keith New, a spokesman for FedLoan, declined to comment on the report, referring questions to the Education Department. A department spokeswoman did not respond to messages seeking comment.

In a written response that was included in the report, James F. Manning, the acting head of the Education Department’s Federal Student Aid office, said the agency agreed with many of report’s recommendations, but offered no timeline for carrying them out.

The audit’s findings echoed warnings about the loan forgiveness program that were raised last year by another government oversight agency, the Consumer Financial Protection Bureau, which released a detailed analysis of the program’s administrative failings. Lawmakers created a $350 million fund to forgive the loans of some borrowers hurt by those mistakes.

The program is also the subject of three lawsuits. The Massachusetts attorney general, Maura Healey, sued FedLoan last year over what she called extensive errors and mistakes in how it managed the program. Two lawsuits filed by groups of borrowers seeking to use the program are also pending.

The government’s continuing failure to ensure that the program operates effectively “is causing widespread confusion and uncertainty,” said Representative Robert C. Scott, a Virginia Democrat, who requested the investigation by the Government Accountability Office.

In its 2018 budget proposal, the Trump administration proposed eliminating the loan forgiveness program to save money, but Congress has shown little inclination to do so.

“Despite the administration’s consistent hostility toward this popular program,” Mr. Scott said, “it is still obligated to ensure that teachers, social workers, first responders and others who enter a career in public service are granted the debt forgiveness as federal law requires.”