U.S. Department of Education Settles Student Loan Forgiveness Lawsuit

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Kristen Kuchar

By Kristen Kuchar

February 21, 2020

The U.S. Department of Education has settled a three-year old lawsuit filed by the American Bar Association (ABA) in December 2016 over the denial of Public Service Loan Forgiveness (PSLF) to four of its employees.

The U.S. Department of Education agreed to consider employees who work for the ABA as public service workers eligible for student loan forgiveness. The employees were initially approved for student loan forgiveness, but were surprised when they were notified years later that the approval was retroactively denied based on changes to the rules.

The ABA initially accused the Department of “improperly administering the Public Service Loan Forgiveness Program.”

The U.S. Department of Education argued that the ABA is not a 501(c)(3) organization. But a public service job, eligible for PSLF, includes public interest law services (including prosecution, public defense and legal advocacy on behalf of low-income communities at a nonprofit organization), which ABA pointed out applies to their employees.

“We are pleased the Department of Education now fully accepts providing loan forgiveness to many people who rightfully earned it,” said ABA Executive Director Jack Rives in a press release.

“Without the dedicated public service of so many attorneys, our nation would not be able to provide services to those in need. Student loan forgiveness is a small but very meaningful way to repay young people who spend 10 years of their lives in lower-paying jobs to serve the public.”

Problems with Student Loan Forgiveness

The trouble with student loan forgiveness isn’t new. As of March 31, 2019, two thirds (68%) of Employment Certification Forms (ECF) have been approved, yet only 1.1% of PSLF applications and 3.6% of Temporary Expanded PSLF (TEPSLF) applications have been approved. More than half (53%) of applications for PSLF were rejected because the servicer says that the borrower has not made 120 qualifying payments.

Other reasons for being denied include payments weren’t made under an income-driven repayment plan, the loans don’t qualify, missing income information, the loans are in default, the employer is not eligible and borrowers who applied for TEPSLF didn’t previously submit an application for PSLF.

If you are struggling with student loan debt, there are ways you can lower your student loan payments, including enrolling in an income-driven repayment plan, temporarily going on a deferment and refinancing student loans to lower your interest rate. Keep in mind when you refinance federal loans into a new private student loan, you’ll lose loan benefits, including the potential for federal student loan forgiveness, an option for an income-driven repayment plan and deferments that many private lenders don’t offer.

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