In 2007, a countdown of sorts began for workers in the federal public service loan forgiveness program.
If you had the right kind of loan from the government, were in an eligible repayment plan and made 120 on-time payments by 2017 or later, your student loan debt could then disappear, as long as you had been working full-time in the right kind of job.
But that last part is tripping up some people and throwing their lives into chaos. The federal government’s loan servicer, the Pennsylvania Higher Education Assistance Agency (which does business as FedLoan), issues individualized rulings on whose work qualifies as public service and whose does not. Sometimes, it gives incorrect advice over the phone to people who then change jobs based on the guidance. Other times, it changes its mind and pulls its approval long after issuing it. And when it does turn borrowers down, they may not get much of an explanation.
Public schoolteachers and firefighters are safe from this confusion for now because the eligibility of their jobs has never been in dispute. But anyone who works for a nonprofit group that is not a 501(c)(3) organization needs to be wary. An adverse ruling can add years to your countdown clock.
Nobody with a brain or a heart would design a program like this from scratch. Still, our overall federal student loan system is a sort of Frankenstein monster that resulted from well-meaning people bolting together various loans and repayment plans over the years.
And so it goes with the federal public service loan forgiveness program. The big idea here was to make public service more attractive, as higher education (including advanced degrees that are mandatory in many fields) became more expensive.
But as I’ve written in recent weeks, many borrowers have received bad advice from their loan servicers and ended up in the wrong type of loans or the wrong repayment plans. Even borrowers who you would expect to be experts, like the Department of Education lawyer who sent me a despairing note this weekend about her own encounters with FedLoan, have trouble getting a firm grip on their loan status.
Michael Francum, who has a master’s degree in social work, exhibits excellent student loan hygiene. He got himself into the right loan and the right kind of repayment plan. He then sent in an official Employer Certification Form to be sure that his work for the National Association of Social Workers — a nonprofit organization that is in a tax category known as 501(c)(6) — qualified as public service. In 2014, FedLoan sent him official notice that it did. “That was exciting,” he said.
The story changed the next year, however, when he called to get an update on his countdown clock. A phone representative told him his employer did not in fact qualify and that its decision was retroactive, wiping out credit for payments he had already made. “I spun out of control, trying to figure out what my recourse was,” said Mr. Francum, who lives in Washington. “It’s a huge financial cloud. Should I buy a house? All of these decisions are waiting.”
He talked to family and colleagues and considered consulting a lawyer. But FedLoan phone representatives implied that he should have known that his employer was somehow suspect, he said. Eventually, he gave up. Both FedLoan and the Department of Education declined to answer any questions for this column about him or others, due to ongoing litigation over similar issues.
Another borrower I heard from this week is a psychiatrist in New Jersey, who did not wish to be identified because he did not want his loan woes to be the first result patients saw if they searched his name on the internet.
When he was considering leaving a job at a nonprofit hospital, he called FedLoan for guidance. After the phone representative told him that any new job “should” be eligible, because patient care was indeed public service, he took a job at a similar salary doing similar work for a for-profit entity.
But FedLoan rejected the certification form from his new position. Now, if he wants to rejoin the forgiveness countdown, he must change jobs again. If he does not, he will probably need to spend an additional decade, at least, repaying much more debt than he would have otherwise.
Lori Gramlich had a similar distressing experience after taking a job at the Maine chapter of the National Association of Social Workers, where she is executive director. She no longer qualified for forgiveness, FedLoan told her. What baffled her was the fact that she had previously worked in a similar position at another organization, and FedLoan had blessed that role as proper public service.
So what made the two jobs different? Ms. Gramlich has no idea, and she said she had not been able to get an explanation from FedLoan that made any sense to her, though one representative told her in December that a rule had changed.
“I was flabbergasted,” she said, while describing being passed from department to department. “I worked for the state for 13 years. I know bureaucracy. This is not my first rodeo. But at one point, I lost it, just sobbing, wondering what I was going to do.”
These borrowers are not alone. As of 2016, according to FedLoan data that the Department of Education used in a presentation, FedLoan had processed 1,068,888 employer certification forms and rejected one third of them. Of those rejected, 21 percent presented an unqualified employer, though it’s not clear how many were close calls, like the National Association of Social Workers may have been.
The Consumer Financial Protection Bureau issued a scorching report last summer about an array of public service loan forgiveness messes. It noted that some borrowers reported monthslong delays in getting answers about certification form questions. One complainant reported that his form was rejected because of employer ineligibility while his co-worker’s was approved a week later.
As for that litigation I mentioned before, one lawsuit over certification problems does shed some light on these matters. The American Bar Association and four individual borrowers, some of whom experienced the same FedLoan flip-flop as Mr. Francum, sued the Department of Education in late 2016. In a brief last year, the department, opining on the topic of whether people can rely on FedLoan not to change its mind, said that any response from FedLoan “does not reflect a final agency action on the borrower’s qualifications” for forgiveness.
In other words, that certification form is by no means certain. Which is pretty rich, given that the Department of Education introduced the forms several years ago precisely because so many people were confused about whether their employment qualified. So good luck to you if you work for, say, a 501(c)(6) and want some financial certainty in your life. (I know of no employee of a 501(c)(3) organization who has had their employment rejected, and the Department of Education website indicates that none of them should be. Please get in touch with me if it has happened to you.)
And no, FedLoan will not precertify a job before you apply. Nor will it allow a forward-thinking employer to send in a job description for preapproval before trying to hire someone. Once upon a time, FedLoan’s website encouraged employers to brag to prospective employees about current workers who had received certification, but that ended quickly once the American Bar Association’s dumbfounded lawyers pointed it out in a legal filing.
That suit shows no sign of settling soon. So people like Ms. Gramlich wait and wonder. “I’ve been advocating for less fortunate populations my whole adult life, and here I am one of those people now,” she said. “And I cannot get out of this mess.”