The Consumer Financial Protection Bureau last week released a reportanalyzing student loan servicers who deal with borrowers who have pursued public service careers. The report was highly critical of many servicers, claiming that their poor service deprived these individuals of debt relief to which they are entitled under federal law.
The report focused on debt relief programs created by the Public Service Loan Forgiveness (PSLF) law passed by Congress in 2007. The law allows substantial student loan debt forgiveness for borrowers who work in certain specified public service careers, under certain circumstances. The careers include military service, nurses and doctors, teaching, social work, legal prosecutors and public defenders, police officers, firefighters, and other first responders. Also included are borrowers who are Peace Corps volunteers and members of AmeriCorps. The CFPB report estimates that one-quarter of the U.S. workforce is currently employed by a public service employer.
The PSLF program forgives some student loan debt for qualifying borrowers after they’ve made 120 timely payments, typically in ten years. Eligibility provisions are quite restricted and the program only applies to federal direct loans. Borrowers must not be enrolled in certain income-driven repayment plan, and all 120 payments must be made while employed full time by a qualified public service employer.
“Borrowers have told us about student loan industry practices that delay or deny access to expected help such as the Public Service Loan Forgiveness program,” said CFPB Director Richard Cordray. “We want those in public service jobs who give back to our communities to be able to stay on track, and not worry about unnecessary debt due to servicer errors.”
Specifically, the CFPB report found that servicers were guilty of three main failures. First, they provided incorrect or insufficient information about loan forgiveness eligibility, leading many borrowers to miss the opportunity to apply. Also, the report cites processing delays and errors that cause borrowers to miss payments and thereby lose eligibility. Finally, many servicers have had problems certifying if various job descriptions and circumstances qualified for the PSLF, and many borrowers reported difficulty correcting program denials from the servicers.
The report comes just months before the Department of Education will begin accepting applications for PSLF relief. October of this year marks ten years since the staute was passed, and according to the CFPB, more than 550,000 borrowers have already indicated an intention to pursue debt forgiveness under the program.