The U.S. Department of Education says it will reach out to federal student loan borrowers who may have been prematurely denied loan forgiveness under the revamped Public Service Loan Forgiveness (PSLF) program and will reprocess their applications.
The move comes after an NPR review of borrower documents, as well as information provided by people familiar with the rollout, revealed that FedLoan Servicing, which manages PSLF, continued to operate under the loan forgiveness program's old rules for weeks after the overhaul's 6 rollout.
As a result, for at least three weeks, the servicer rejected the applications of some borrowers who appear to qualify for forgiveness under the new terms.
One borrower advocacy group places the blame for these early rejections squarely on FedLoan and PHEAA. The Student Borrower Protection Center (SBPC) sent a letter Tuesday demanding the company "cease improper and illegal mismanagement of the recently announced Public Service Loan Forgiveness overhaul."
But through spokesman Keith New, FedLoan insists it's acting properly — that it cannot fully implement the overhaul until the department formally shares detailed plans with its servicers, amends its contract with FedLoan and begins sharing the results of FSA's own borrower eligibility analyses.
The Education Department says these early mistakes should not overshadow the good news of the PSLF overhaul. The department has already sent notices to many borrowers, telling them how much closer they are to loan forgiveness under the new rules.
Further complicating matters, PHEAA/FedLoan announced in July that it would not be renewing its loan servicing contract with the U.S. government. That contract technically expires in about six weeks, on Dec. 14, though PHEAA spokesperson Keith New made clear in an email to NPR that "we will keep servicing loans under FSA's direction for as long as needed," adding, "there will be no hard exit on Dec. 14."
Compliance & Ethics