On August 9, 2017, the United States Department of Education filed a legal motion may have huge ramifications for thousands of teachers, social workers, police officers, and other public servants and government officials. This motion asserts that there was never a final decision on whether public service employees would have their student debt forgiven, as many believed.
The crux of the issue….
Public Service Loan Forgiveness was created 10 years ago. In a blog post last year, the official website of the USDE described the program as a “broad, employment-based forgiveness program for federal student loans.” Any person working for the government or a non-profit organization could have their educational loans erased after 10 full years of on-time payments.
Have you been doing the math? That means that the first group of borrowers who are eligible for this Forgiveness program would be able to pursue forgiveness for their outstanding loans this fall.
So, what’s the situation?
There is a group of lawyers who, along with the American Bar Association, are suing the Department of Education, for allegedly changing the rules on the qualifications for PSLF, for their employers. Because the ABA is not a 501(c)3 nonprofit, and lawyers are not necessarily under the employee of the state or “in the public service,” these lawyers and ABA employees are not currently qualified for forgiveness on their student loan debt under the PSLF.
The Department of Education filed for “summary judgment;” they want the case settled without going to trial.
The USDE states that it has taken no final action on any of thousands of applicants for PSLF. The department may have accepted their paperwork, the filing states, but those are only “interim, non-binding, individualized determinations.”
In addition, the filing states that this final eligibility determination will only be decided after those 10 full years of payments: “Once a borrower has made 120 qualifying payments, [they] may submit an application for PSLF.”
NPR has previously reported that many people in the last ten years made binding life decisions based on the promise of student debt forgiveness under the PSLF. Some chose lower-paying jobs in the public sector and then enrolled in payment plans as instructed by the Department of Education. This left their loans to accrue enormous amounts of interest, in the hope that in ten years, their student debt would be wiped out.
Ten years later, many of these people are facing thousands of dollars in interest debt, on top of their initial loan principals, that they had not planned on.
Chong Park, a partner at Ropes & Gray law firm, is representing the ABA and the individual plaintiffs in this suit against the USDE. He said in a statement: “The expectations and financial well-being of thousands of dedicated public servants hang in the balance in this case…. In its new filing, the Department of Education unfortunately reiterates that it has no intention of upholding promises made under the very program it created. We find this position unfair and unlawful.”
Regretfully, the Department of Education has made no further comment or disclosure, other than the public statements made in the legal documentation of the case. Whether this will be resolved amicably or not is still to be determined; but for those who placed all their chips on this one hand, they may need to resign themselves to the knowledge that they held the wrong cards for ten years.