Trump Business Model in Effect at DofEd: Borrowers ‘Chilled to the Bone’ as DOE Reneges on Student Loan Forgiveness

Young people who took low-paying, public-sector jobs with promise of loan forgiveness now ‘hosed’
by Lauren McCauley, staff writer at CommonDreams

In a troubling development for the countless people saddled with student debt, the U.S. Department of Education (DOE) may be reneging on a promise made to over 550,000 such borrowers who were led to believe that their loans would be forgiven after ten years of work in the public service.

Responding to an ongoing lawsuit from four borrowers, the DOE has given no explanation but says that approval letters sent to individuals who signed up for the Public Service Loan Forgiveness Program are not in fact “binding,” the New York Times reported Thursday.

Times reporter Stacy Cowley wrote:

In a legal filing submitted last week, the Education Department suggested that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said.

The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment—and the clocks start ticking on the remainder of their debts.

The program, established in 2007, covers individuals who work for 10 years at an approved place of employment, such as a nonprofit or government organization. After an individual makes 120 monthly loan payments, the program ostensibly “forgives the remaining balance.” As much as a quarter of the U.S. workforce could potentially qualify for the loan forgiveness, according to the Consumer Financial Protection Bureau.

However, for the 553,000 who have gone through the process, submitting forms to check their workplace eligibility and then receiving a note of approval, that guarantee is in doubt as they may now unexpectedly owe thousands of dollars to pay off those debts.

Journalist David Dayen compared the move to the Bonus Army scandal, when roughly 43,000 Depression-era World War I veterans and their supporters stormed Washington D.C. to demand payment on cash vouchers given to them for their service before they were forcibly driven out by Army Chief of Staff General Douglas MacArthur under order from President Herbert Hoover.

Another reader pointed out on Twitter:

Hundreds of thousands of people, mostly young, took public-interest jobs for lower pay relying on their govt’s promise. Now, hosed. pic.twitter.com/o4UnjDJG5j

— Blair Reeves (@BlairReeves) March 31, 2017

That same reader added, “This should chill every millennial with debt to the bone.”

This should chill every millennial with debt to the bone. The Education Dept reneges on student loan forgiveness:https://t.co/NISZJS8eI3

— Blair Reeves (@BlairReeves) March 31, 2017

The program encourages individuals to resubmit the forms each year and with each job change, to make sure they still qualify. But, as Cowley notes, “some of those approved borrowers might get bad news because it is unclear whether the certifications are valid.”

The reporting continues:

[Plaintiff Jamie] Rudert submitted the certification form in 2012 and received a letter from FedLoan affirming that his work as a lawyer at Vietnam Veterans of America, a nonprofit aid group, qualified him for the forgiveness program. But in 2016, after submitting his latest annual recertification note to FedLoan, he got a denial note.

The decision was retroactive, he was told. None of his previous work for the group would be considered valid for the loan forgiveness program.  What changed? Mr. Rudert said he did not know. After filing a complaint with the Consumer Financial Protection Bureau, he received a reply from FedLoan saying that his application “had initially been approved in error.”

In December, Rudert and the American Bar Association filed suit against the DOE charging that the agency acted “arbitrarily and capriciously.”

“The idea that approvals can be reversed at any time, with no explanation, is chilling for borrowers,” Cowley observed, and is incredibly worrisome for the “first wave of qualified workers will be eligible to submit applications for debt forgiveness in October.”

While the scandal falls under the purview of the Obama administration, many fear that recently-installed Education Secretary Betsy DeVos will be no friend of student borrowers. One of DeVos’ first acts earlier this month was to reverse an Obama-era guidance which limited fees debt collectors could charge on student loans.