USED could have seen PSLF Fail coming

The Department of Education (USED) knew by 2016 that hundreds of thousands of student loan borrowers planning to apply for public loan service forgiveness (PSLF) were headed for rejection as they started applying in late 2017. The Department conducted a review of servicing contractor PHEAA’s administration of PSLF on October 25, 2016, about a year before the first cohort of borrowers would become eligible for loan cancellation. At the time of the review, 449,860 borrowers were designated as PSLF participants, presumably because they had at least one approved public service employer certification form (ECF). The reviewers audited a sample of 34 borrower loan files, and found that 53% had ZERO qualifying payments. Of those, about 40% were in a non-qualifying payment plan and 60% had ECFs with employment periods ending more than one year prior to the review date, in other words, no current evidence of qualifying employment. Given that all of these borrowers submitted at least one ECF, it is reasonable to assume that most if not all of them were unaware that they were making no progress towards the required 10 years of repayment.

Instead of faulting PHEAA for a situation in which half of borrowers were in danger of not getting PSLF credit for their payments, USED delved into the minutiae of PSLF payment counting, and found two instances of payment-counting errors resulting from servicing transfers. In their recommendations, the USED reviewers stress “it is imperative that Fedloan Servicing and FSA partner to ensure only those truly eligible for forgiveness receive this benefit.” No mention is made of any need to get in touch with the 53% of borrowers who are in the wrong payment plan or do not have up-to-date employer certifications.

The authors of the October 25, 2016 review (Debbe Johnson, Larry Porter, and Christian Lee Odom of SFA) note on the first page that it is for internal USED use only and is a policy deliberation document, presumably to shield it from FOIA release. It became public when the House Education and Labor Committee released the review as an exhibit to the committee’s October 2019 report on the PSLF fiasco.