Biden administration temporarily expands student loan forgiveness program for public servants

[BumRushDaShow]

Source: Washington Post

Service members, teachers and other public servants who have been shut out of a controversial student loan forgiveness program will get another chance at debt cancellation, the Education Department said Wednesday. The federal agency will temporarily allow all payments borrowers made on federal student loans to count toward Public Service Loan Forgiveness, regardless of the loan program or payment plan. It estimates the move will bring more than 550,000 people closer to debt cancellation, including 22,000 who will be immediately eligible.

“Borrowers who devote a decade of their lives to public service should be able to rely on the promise of Public Service Loan Forgiveness. The system has not delivered on that promise to date, but that is about to change for many borrowers who have served their communities and their country,” Education Secretary Miguel Cardona said Wednesday. Created by Congress in 2007, the loan forgiveness program has been derided by participants, lawmakers and consumer groups for being exceedingly complex and poorly managed.

To qualify, borrowers must make 120 on-time monthly payments for 10 years to have the remaining balance canceled. They must work for the government or certain nonprofit organizations. They must have loans made directly by the federal government. And they must be enrolled in specific repayment plans, primarily those that cap monthly loan payments to a percentage of their income. People have complained of receiving bad advice from loan servicing companies hired by the department, leading them to believe they were making qualifying payments when they were not.

Poor guidance can add years to the process and be devastating for those who plan their lives and careers around the promise of tax-free debt cancellation, consumer advocates say. They say that many awaiting forgiveness have been paying their debt for more than a decade but are being held back by technicalities.

Read more: https://www.washingtonpost.com/education/2021/10/06/public-servant-loan-forgiveness/

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Glad the administration is finding ways to fix past issues and get done what needs to be done!

[luv2fly]

1. When these loans are forgiven, the loan companies just get nothing?

I'm not clear on how loan forgiveness works, the loan companies get nothing or is there some way of making them whole?

[BumRushDaShow]

2. It seems that this is addressing people who paid on loans

but that money was going to the wrong places or to entities that eventually defaulted... From the article -

To address some of those technicalities, the Education Department is counting payments made under the following scenarios:

People who made payments on loans originated through the now-defunct Federal Family Education Loan Program (FFELP).

People who consolidated their FFELP loans into the Direct Loan program. Typically, only payments made after the consolidation would qualify for forgiveness, but now those made previously also will qualify.

People who have made 120 payments on a Direct Loan, but in the wrong repayment plan.

Active-duty members of the military whose loans are deferred or in forbearance while they’re serving.

[missingthebigdog]

3. There are no loan companies

These are loans that are made directly from the Federal government.

[Fiendish Thingy]

5. But the collection of payments is contracted out to private companies

Who I am sure get a commission on each payment, so the more payments, the more profit they make.

[BumRushDaShow]

7. Anything that is "contracted out" by the government

usually has a clause to basically "un-contract" it (stop work). In this case, these are not "private" loans. As it is, this action appears to be for a very narrow set of circumstances/borrowers compared to the primary federal student loan programs, the current ones described here - https://studentaid.gov/understand-aid/types/loans

[Fiendish Thingy]

8. 60 minutes covered this last Sunday- out of hundreds of thousands of military eligible

Only something like 150 received forgiveness of their loans.

There must be some underlying financial incentive for these contractors to mislead borrowers resulting in increased repayment periods and increased balances owed (when borrower make minimal payments required to qualify for forgiveness, the payments don’t even cover the interest).

[BumRushDaShow]

9. They are one of the groups being addressed

(I had posted above - https://www.democraticunderground.com/?com=view_post&forum=1014&pid=2809316)

To address some of those technicalities, the Education Department is counting payments made under the following scenarios:

People who made payments on loans originated through the now-defunct Federal Family Education Loan Program (FFELP).

People who consolidated their FFELP loans into the Direct Loan program. Typically, only payments made after the consolidation would qualify for forgiveness, but now those made previously also will qualify.

People who have made 120 payments on a Direct Loan, but in the wrong repayment plan.

Active-duty members of the military whose loans are deferred or in forbearance while they’re serving.

It's possible that when the initial guidance had been developed for these programs in the past, there were gaping loopholes that allowed crap to happen. The hope is that these loopholes are being closed with these actions.

But I think in any case, grifters are gonna grift and if you give them leeway to do so, you don't need to even give them any extra incentives, they will fill in their own.

It's often one of those cases where people whine about how many pages are in legislation or complain about why regulations are literally "book length", and this is why. I.e., if it's not spelled out ("explicitly" ), then it gets interpreted ("implied" ) and that is where the disconnect can happen and problems can occur. It's why you see stuff like those huge software EULAs or Warranty Agreements (the "fine print" ).

[Dr. Shepper]

4. I'm in The PSLF program

All loans that can be forgiven are from the US Dept of Education. No private loans count.

[Johnny2X2X]

6. They're having open hearings this week

They’re overhauling the whole system. Pay as you earn is going to be changed too. From 10% to 5% of discretionary income is what Biden wanted.

You can register to comment on these hearings here, next meeting starts at 10 am EST today, you have to install Teams to view.

https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/index.html?utm_content=&utm_medium=email&utm_name=&utm_source=govdelivery&utm_term=

Comment that you expect that the committee fulfil Joe Biden's campaign promise on PAYE to reduce it from 10% to 5%.