GAO Finds Flaws with Expanded Public Service Loan Forgiveness
The U.S. Government Accountability Office (GAO) has issued a report reviewing the performance of the Temporary Expanded Public Service Loan Forgiveness (TEPSLF). The report finds that the process of applying for loan forgiveness is not clear to borrowers and could be simplified. The GAO also recommends improvements in the U.S. Department of Education’s efforts to publicize TEPSLF.
The GAO’s report, PUBLIC SERVICE LOAN FORGIVENESS: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion, GAO-19-595, September 5, 2019, criticized the current process for applying for TEPSLF.
TEPSLF Application Process Is Confusing
Borrowers who are ineligible for PSLF may qualify for loan forgiveness under TEPSLF if they were in the wrong repayment plan.
Currently, borrowers must first apply for Public Service Loan Forgiveness (PSLF) and be denied. Then, the borrower must submit a request by email for reconsideration under the Temporary Expanded Public Service Loan Forgiveness (TEPSLF).
Many borrowers find this confusing. Why must they first apply for PSLF, when they already know that they are ineligible?
The U.S. Department of Education explained that the PSLF application form contains the information the government needs to evaluate eligibility for TEPSLF, and that requiring borrowers to apply for PSLF was a convenient way of making TEPSLF available during the two-month window after the legislation was enacted.
The GAO found that 71% of TEPSLF applications were denied because the borrowers had not previously submitted a PSLF application.
The GAO recommends streamlining the application process by integrating the requests for PSLF and TEPSLF. For example, a checkbox could be added to the PSLF application form to allow reconsideration under TEPSLF. Alternately, the U.S. Department of Education could automatically reconsider PSLF applications under the TEPSLF program when the PSLF application was denied because the borrower was in the wrong repayment plan.
The U.S. Department of Education says that it will take a year to implement these changes.
Denial Letters Do Not Mention Appeals Process
The GAO also found that PSLF and TEPSLF denial letters do not include important information. In particular, the denial letters do not mention that borrowers can appeal the PSLF/TEPSLF decisions.
Borrowers can request an additional review by the TEPSLF servicer or complain directly to the U.S. Department of Education through the FSA Feedback system or the FSA Ombudsman.
This would be particularly relevant to borrowers who were denied because they had made fewer than 120 qualifying payments but who had been in repayment for 10 or more years.
Perhaps as many as 75% or more of these borrowers actually made the correct number of qualifying payments, based on a small sample size evaluated by the GAO. This makes increasing awareness of the appeals process essential to ensuring that eligible borrowers receive loan forgiveness.
Borrowers Lack Awareness of TEPSLF
Although the U.S. Department of Education has done some outreach to increase borrower awareness of TEPSLF, the GAO found that more could be done.
The GAO recommends increasing awareness of TEPSLF by requiring loan servicers to include information about TEPSLF on their web sites and by including information about TEPSLF in the U.S. Department of Education’s PSLF Online Help Tool.
Practical Tips for Borrowers Pursing PSLF or TEPSLF
Many borrowers say that the PSLF servicer has failed to count the number of qualifying payments correctly.
Of the borrowers who applied for TEPSLF and were denied because they had made fewer than 120 qualifying payments, 62% had been in repayment for less than 10 years. It would be impossible for these borrowers to have made the required 120 qualifying payments.
However, that leaves 38% of borrowers who had been in repayment for 10 or more years but were denied for not making the required 120 qualifying payments (63%) while working for a qualifying employer (37%). It is possible that the loan servicer has counted the number of qualifying payments and qualifying employment incorrectly.
To increase the likelihood of qualifying for loan forgiveness, borrowers should keep careful records of their qualifying payments. These records should include, for each loan
- The name of the loan program
- The dates of the payments
- The amount of each payment
- The repayment plan under which the payment was made
- The name and EIN of the qualifying employer
- The date annual income paperwork was submitted each year
- Details about any deferments, forbearances or missed payments
Compare these records against a checklist of the requirements for loan forgiveness. Count the number of qualifying payments.
Borrowers should also submit employer certification forms annually and whenever they change employers.
If an application for loan forgiveness is denied because of an insufficient number of qualifying payments, challenge the inaccurate information. Provide the servicer with a copy of your records. Be persistent. You may need to challenge the accuracy of the servicer’s information multiple times and submit multiple appeals before the application for loan forgiveness is approved.