Debt

Education Department Warns Student Loan Forgiveness Program May Not Be Valid

The Department of Education warned in a legal filing last week that more than 550,000 people who signed up for a student loan forgiveness program in which their loans would be erased after ten years of public service, may no longer be valid.

According to a report in The New York Times, the Department of Education implied borrowers couldn’t rely on the administrator of the program to say whether they will qualify for loan forgiveness. What’s more, the thousands of letters send by FedLoan Servicing, the administrator, isn’t binding and can be rescinded.

The filing comes just as the first group of potential beneficiaries are reaching the final period of their ten-year commitment. Four borrowers and the American Bar Association have filed a lawsuit against the Education Department, noted the report.

“It’s been really perplexing,” said Jamie Rudert, one of the plaintiffs mentioned in the NYT. “I’ve never gotten a straight answer or an explanation from FedLoan about what happened, and the Department of Education isn’t willing to provide any information.”

According to supporters of the program, the loan forgiveness is a big enough benefit that people will take public service jobs over higher earning jobs in the private sector. The report noted the program covers people with federal student loans who work for 10 years at a government or nonprofit organization, including in public schools, museums, doctors at public hospitals and firefighters. The federal government signed off on the legislation in 2007 with backing from both parties.

The New York Times noted around 25 percent of the country’s workforce could be eligible for the program. Still, only a small number of the millions of workers who could be eligible have tapped the program, with less than 553,000 borrowers submitting one or more certification forms to FedLoan and receiving an approval.

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