Borrowers denied student loan relief get second look
Part of settlement from suit brought by teachers
Thousands of public servants who were rejected from a student loan forgiveness program will get their cases reviewed by the Education Department as part of a new settlement in a lawsuit brought by one of the nation’s largest teachers unions.
The settlement that was announced Wednesday aims to resolve a 2019 suit accusing the department of mismanaging its Public Service Loan Forgiveness program – a troubled initiative that the agency is separately working to expand through an overhaul announced last week.
The suit was brought by the American Federation of Teachers on behalf of eight members who said they were wrongly denied debt cancellation through the program.
Created in 2007, the program promises that college graduates who take jobs in public service can have their federal student debt forgiven after making 10 years of monthly payments. But the majority of applicants have been rejected, often for failing to meet complicated eligibility rules.
According to the lawsuit, the Education Department routinely made errors while processing applications yet offered no appeals process. The suit, which argued borrowers were illegally being denied their right to due process, targeted the department and former Education Secretary Betsy DeVos.
As part of the settlement, the department said it will automatically review applications for all borrowers
who were rejected prior to Nov. 1, 2020, as long as they had made 10 years of payments. If the department finds that a rejection was justified, it will email borrowers to explain the decision and how they can become eligible.
It goes a step further than a temporary expansion announced last week, which allows some previously ineligible borrowers to get loan forgiveness if they submit an application by the end of October 2022.
A separate appeals process will be created by April 30, 2022, for anyone whose application is denied. All eight plaintiffs in the suit will also get their loan balances erased, estimated at nearly $400,000.
Randi Weingarten, president of the AFT, called it a “game-changing victory” for educators, nurses and other public workers who were wrongly rejected.
Among the plaintiffs is Debbie Baker, an Oklahoma teacher who made 10 years of payments before learning she had a type of loan that isn’t eligible under the program’s rules. She will now get more than $80,000 in student debt erased.
“To be defrauded like that is not right, especially during a pandemic when I’ve been teaching in person every day,” she said in a statement. “Now, this settlement finally makes things right.”
Some other plaintiffs said they were incorrectly told by their loan servicers that they were eligible for the program, only to find out later that they had an ineligible loan or repayment plan. They also will see their loans cleared.
Last week, the Education Department announced it will temporarily lift some rules to expand eligibility while it works on permanent improvements.