Some student loan borrowers may get a one-time reprieve
Thousands of student loan borrowers who work as teachers, police officers, nurses or in other public service jobs may soon benefit from a $350 million one-time expansion of a federal program that could forgive their remaining debt.
A compromise in the $3.1 trillion federal spending bill signed Friday by President Trump includes a one-time reprieve for borrowers who feared they’d missed the chance to get out from under often-crippling student loan debt that makes it hard to buy a home, start a family or pay day-to-day bills.
“I’m very glad that, for the first time, we got some money to help public servants unfairly trapped under a mountain of debt,” said Sen. Elizabeth Warren, D-Mass., who fought for the reprieve. But she stressed that the fight for a “permanent fix” goes on.
The program
Created in 2007, the program was designed to help student loan borrowers in public service jobs get their remaining debt forgiven if they made 120 repayments, roughly 10 years’ worth, under a qualifying repayment plan. Each repayment must be made in full and on time.
The borrowers must work full time for a qualifying employer, such as a federal or local government agency, or an eligible non-profit organization.
The program is limited to student borrowers who took out direct loans from the federal government. Private loans and non-direct government loans don’t qualify. However, borrowers may qualify if they consolidate their existing debt into direct loans. Their repayment clocks start when they do.
Borrowers must be enrolled in a qualifying repayment program. There are nine student loan repayment options. Some qualify; others don’t.
The first potential qualifiers began filing applications for loan forgiveness in October 2017. As of Feb. 28, slightly fewer than 13,000 unique applications had been received, the U.S. Department of Education said recently.
Approval and denial statistics aren’t yet available, due to “the long period of time it takes to verify 10 years of a borrower’s employment and payment histories,” the agency said.
The problems
Millions of student loan borrowers took out non-qualifying loans to pay for their studies. Tens of thousands are believed to have mistakenly enrolled in the wrong repayment programs.
Why? A Consumer Financial Protection Bureau report issued in June cited the complex loan process, as well as complaints from borrowers who said they were misled by loan servicers the federal government chose to handle student loan repayments.
The temporary solution
The budget deal includes $350 million “to remain until expended” on a first-come, first-serve basis to help student loan borrowers who discovered they are ineligible for debt forgiveness.
The Department of Education must compare a borrower’s most recent monthly repayment with the payment for the same month in the prior year. Those who were paying less than they would have in a qualified repayment program aren’t eligible for loan forgiveness.