NPR, October 17, 2018: Why public loan forgiveness is so unforgivingÂ
On the morning of Monday, Aug. 27, Seth Frotman told his two young daughters that he would likely be home early that day and could take them to the playground. They cheered.
Frotman assumed that after walking into his office and, at precisely 9:30 a.m., hitting “send” on an incendiary resignation letter to lawmakers accusing the Trump administration of betraying student borrowers, he would promptly be walked out with his things, and his career, in a cardboard box.
“Unfortunately, under your leadership,” Frotman wrote to his boss, Mick Mulvaney, “the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America.”
Frotman arrived at this conclusion, in part, after he and his team reviewed thousands of borrower complaints the previous summer.
Congress created Public Service Loan Forgiveness (PSLF) in 2007, in the waning days of the Bush administration. The pitch to borrowers was simple:
Spend 10 years teaching, nursing, policing or otherwise working for a qualified nonprofit while also making 120 monthly payments against your student loans, and the government would forgive whatever’s left. As a thank you. The pitch may have been simple, but the execution was anything but.
Frotman served three years as the CFPB’s student loan ombudsman and head of its Office for Students and Young Consumers. A fierce watchdog for student borrowers, Frotman and his team reviewed thousands of complaints about the questionable practices of student loan companies.
In the spring of 2017, Frotman and his team investigated thousands of complaints about a range of issues and found a disturbing pattern with PSLF, borrowers would notify their loan servicers of their intent to enroll in the program, then make it years into the repayment process before being told they didn’t yet qualify.
The Department of Education and the Government Accountability Office (GAO) have both released reviews of PSLF that back up Frotman’s CFPB findings.
It found that, over the past year, nearly 29,000 applications for Public Service Loan Forgiveness were submitted and processed. Of those, 99 percent were denied, the vast majority for “not meeting program requirements.”
Some borrowers had the wrong loans or employers that didn’t qualify. Others were in the wrong repayment plan. In fact, more than half of borrowers who asked to have their loans and employment double-checked, to be sure they qualified for PSLF, “either did not meet basic eligibility requirements or had yet to make any qualifying loan payments,” according to the report.
But this communication breakdown is only part of the PSLF problem. Yes, servicers and their call-center agents are often uninformed and unhelpful. But it’s also clear, servicers sometimes fail borrowers, intentionally.
