Student loan debt has become a $1.5 trillion crisis with no end in sight, which is why some politicians, including Massachusetts Senator Elizabeth Warren, have suggested granting student loan forgiveness to families who meet specific income requirements. Whether solutions like Warren’s are feasible or not remains to be seen, but there’s a common feeling among forgiveness naysayers that college debtors should a) pull up their bootstraps and pay off their loans the hard way, or b) take advantage of one of the many loan forgiveness programs already available today.
That second suggestion has become a point of contention among student borrowers, including the newest Class of 2019 graduates who unfortunately owe an average of $33,000 on their loans. Why? Because many contend, and rightfully so, that most federal student loan forgiveness programs don’t actually work in their current state.
A March 2019 report from the U.S. Department of Education highlights this point. According to the newest data, 73,554 unique borrowers have applied for Public Service Loan Forgiveness (PSLF) since its inception through March 2019. Since then, only 864 have been approved by the loan servicers processing the applications. In other words, less than 1% of borrowers who have sought out this program have been granted forgiveness of their loans. But why?
The Fickle Nature Of Student Loan Forgiveness
You may be wondering how so few applicants are approved for this program — a program that seems easy enough to understand. Fortunately, the U.S. Department of Education sheds some light on the most common reasons over 70,000 people have been denied access to loan forgiveness through PSLF. Reasons for denial include:
- Lack of qualifying payments (53%)
- Missing information (25%)
- No eligible loans (16%)
- Employment dates (2%)
- Employer not eligible (2%)
In other words, far too many applicants didn’t quite meet the program requirements for PSLF, they didn’t have the right type of loans to qualify, or they submitted an incomplete application. This just goes to show the fickle nature of PSLF, and perhaps even other government-sponsored student loan repayment plans such as Pay As You Earn (PAYE) or Income Based Repayment (IBR), which haven’t been around long enough to forgive anyone’s loans quite yet.
If you don’t quite meet the requirements for any forgiveness program, you may not find out you’ve been off track until it’s far too late. By that point, however, you’re already primed to miss out on tens of thousands of dollars in loan forgiveness you were counting on.
It’s important to note here, though, that most borrowers likely didn’t start the process towards PSLF until 2011 or 2012 – so that 120 payment mark may not come until 2021 or 2022.
What If Your Student Loan Application Is Denied?
New York debt attorney Leslie Tayne frequently works with borrowers who have high levels of student debt, and she says they have several options to consider if they are denied student loan forgiveness.
First off, she says you should try not to be overly discouraged — and try to focus on solutions to your debt problem instead of leaving it to fester. This may include simply filling out another application for loan forgiveness that includes any information you were missing before.
If you find you’re actually not eligible, you’ll have to pull yourself together and dust yourself off.
“After dealing with the initial disappointment, it’s important to dust yourself off and understand what you can do to come up with a strategy to pay off the loans you do have,” she said. “There’s no point in being upset about it and letting the fact that your loans won’t be discharged interfere with the process of getting them paid off as soon as possible.”
Second, assess your repayment options. Do your best to research repayment plans as thoroughly as you can, keeping both your current and future financial situation in mind. You may want to pay off your loans as fast as humanly possible, but it’s possible altering your repayment plan or refinancing your loans to score a lower monthly payment could help you most right now.
“Also, know that you can change your repayment plan if your financial situation changes,” says Tayne.
Finally, seek professional help if you need it. Tayne says she sees so many people borrow for school without any sort of plan, then have to come to grips with their situation after it’s far too late. In some cases, legal counsel is desperately needed to get people on the right track or at least inform them of their rights.
But Tayne says to be careful with “who” you choose to seek help from since she sees many people calling themselves experts simply because they’ve resolved their own debts.
“That doesn’t make them an expert on yours or the overall process,” she said.
Avoiding A Surprise Denial
Since Public Service Loan Forgiveness (PSLF) has only been around since 2007, only the first few years of potential applicants are currently being pushed through the system. This gives those who hope for loan forgiveness the opportunity to learn from their mistakes.
If you’re in the midst of pursuing PSLF or simply considering it, one step you can take is accurately filling out an Employment Certification Formevery single year you’re in the program. This form is filled out in part by your employer and filed with the U.S. Department of Education as a means to check and guarantee that you are in a job that qualifies you for PSLF.
From there, make sure to pay all of your student loans early or on time, and ensure your loans are the right type of loans required for your program. Never become complacent, or you could wind up making a costly mistake.