Personal Finance

Student Loan Forgiveness Settlement Will Allow For Reconsideration Of Thousands Of Rejected Applications

A major settlement agreement has been reached in a long-running lawsuit brought by student loan borrowers against the U.S. Department of Education for failures associated with the Public Service Loan Forgiveness (PSLF) program.

The PSLF program provides student loan forgiveness to borrowers who work for 10 or more years in public service jobs in government or for nonprofit organizations. But the program has been plagued by complicated eligibility criteria, rejection rates of 98%, and poor oversight by the Department of Education. Borrowers, through the American Federation of Teachers (AFT), filed a class action lawsuit against the Department in 2019 over rejected PSLF applications.

Under the settlement agreement announced on Wednesday, within 90 days the Department will automatically review all applications for PSLF that were denied prior to November 2020. The Department will also reconsider rejected PSLF applications upon request of a borrower through a formal, official process that the Department will establish. Until now, there has been no formal process to appeal a denied PSLF application or request reconsideration. Instead, many borrowers have had to request manual reviews of rejected payments by their loan servicer, which can take months or even years.

“The AFT has fought hard for years to make PSLF work for the borrowers it was intended to help, and with this settlement we have ensured that a promise made is a promise kept,” said AFT President Randi Weingarten in a statement. “Congress pledged relief to those who dedicated their lives to serving the public, but 98 percent got a debt sentence instead. Today is a day of vindication for the millions of borrowers who took the government at its word but were cruelly denied through no fault of their own.”

The settlement agreement coincides with the Biden administration’s dramatic expansion of the PSLF program announced last week. Under its “Limited PSLF Waiver” program, which will be available until October 31, 2022, the Department of Education will temporarily ease the original PSLF rules that has limited PSLF eligibility to only certain types of federal student loans and certain repayment programs. By broadening eligibility to more federal student loans, such as FFEL-program loans and federal Perkins loans, and allowing payments made under any repayment plan to qualify, the Department estimates that over a half a million student loan borrowers will get closer to student loan forgiveness, with thousands potentially becoming immediately eligible for nearly $2 billion in student loan forgiveness in the coming months.

Further Reading

Biden To Transform Public Service Loan Forgiveness With Huge New Changes: Key Details

Student Loan Forgiveness Changes: Who Qualifies, And How To Apply Under Biden’s Expansion Of Relief

These Borrowers Are Left Out Of Biden’s New, Expanded Student Loan Forgiveness

What Navient And FedLoan Borrowers Should Know As Major Student Loan Servicing Changes Loom

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