Student loan forgiveness: Troubled public servant program 'needs a very critical look,' Education Secretary says
The Biden administration appears to be highly motivated to fix the Public Service Loan Forgiveness (PSLF) system that has been long considered to be "broken" by experts.
"We need to do better with Public Service Loan Forgiveness — about 98% have been rejected, of the claims that are put in," Education Secretary Miguel Cardona told a hearing held by the House Subcommittee on Labor, Health and Human Services, Education, and Related Agencies on Wednesday. "To me, this really needs a very critical look to make sure that the intention that you have in Congress is followed through on, and that we're doing everything to put our students at the center of the conversation."
The PSLF program, created by Congress in 2007, enables government and non-profit employees with federally-backed student loans to apply for forgiveness after proof of 120 monthly payments under a qualifying repayment plan.
House Appropriations Committee Chair Rosa DeLauro (D-CT) had asked about the $800 million Congress provided to the Education Department (ED) in 2018 to fix PSLF through the creation of the Temporary Expanded Public Service Loan Forgiveness (TEPSLF) program.
Both programs have weak track records: As of November 2020, according to data from Federal Student Aid, PSLF had a 2.2% approval rate (6,493 applications out of 296,340) while TEPSLF had an approval rate of 6.3% (2,330 applications out of 39,318).
"A lot of attention is going to be placed on this moving forward," Cardona assured the House hearing. "We're bringing folks on board that have that mentality to make sure that we keep the students at the center of the conversation."
'More must be done'
Lawmakers led by Representative John Sarbanes (D-MD), Senator Tim Kaine (D-VA), and Senator Kirsten Gillibrand (D-NY) separately called on Cardona to strengthen PSLF.
“We urge you to take action to waive or modify counterproductive restrictions, barriers and donut holes in PSLF," the lawmakers stated in a joint letter sent on Wednesday. "We also urge the [ED] to take proactive steps to simplify the process, provide more transparency and bolster oversight of the program and loan servicers to ensure that the PSLF program is implemented in accordance with congressional intent.”
The letter also asked Cardona to invoke the Higher Education Relief Opportunities for Students (HEROES) Act of 2003, which provides authority to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs under title IV” during a period of national emergency to "take action to waive or modify counterproductive restrictions, barriers, and donut holes in PSLF."
Some of these recommendations include things like expanding the definition of an “eligible loan” under PSLF to include all federal student loans and waiving the restriction that a borrower be employed in public service at the time of forgiveness.
"Now is the time to fix PSLF," the letter concluded, "and finally allow the program to benefit the millions of dedicated teachers, nurses, first responders, service members, and other public servants who have depended on this relief.”
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Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.
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