Almost 3 million people are employed by the Department of Defense, many of whom are performing a quintessential form of public service: Serving in the armed forces. But as of January of last year, just 124 members of the military had their student loans discharged under the Public Service Loan Forgiveness program.
That equates to roughly 9% of servicemember applications for debt forgiveness under the program — and that’s even better than the 1% overall national success rate.
That’s according to a report released Thursday by the Government Accountability Office, which also found that 1,410 members of the military have applied to have their debt cancelled under the program.
Public Service Loan Forgiveness forgives the remaining balance on Direct Loans after the borrower has made 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a public-service employer listed in the program.
What’s more, 11% of the 176,906 active-duty military servicemembers who had loans already eligible for forgiveness or loans that could be consolidated to qualify filled out the paperwork.
In order to qualify for forgiveness, borrowers need to be in the right type of student-loan repayment program, not all of them are eligible; they need to work in the right type of public service job, some nonprofit employment doesn’t qualify; they need to make 10 years-worth of monthly payments; and they need to have the right type of federal student loan.
Among the servicemembers who had their debt discharged, 34 were from the Army, 37 from the Navy, 42 from the Air Force and 11 from the Marine Corps. Overall, just 287 borrowers employed by the Department of Defense had their debt forgiven under the program, out of 5,180 who applied — a 94% denial rate.
“Just when you think we’ve hit rock bottom when it comes to the complete mismanagement of the Public Service Loan Forgiveness program, you see reports like this,” said Seth Frotman, the executive director of the Student Borrower Protection Center, a borrower advocacy group.
“To finally get confirmation that only 124 service members have received forgiveness more than a decade after this program was created is just truly a national disgrace.”
What’s more, the GAO found that just 11% of the 176,906 active-duty military servicemembers who had loans already eligible for forgiveness or loans that could be consolidated to qualify for forgiveness had filled out the paperwork to put them on track towards relief.
Streamlining the process for these servicemembers can be particularly important, given the demands of an active-duty soldier.
The GAO’s findings are the latest evidence of the challenges borrowers have faced accessing PSLF, an initiative that allows people working for the government and at certain nonprofits to have their federal student loans discharged after 10 years of payments and public service work.
PSLF has struggled in its earliest tests to deliver on its promise
The program, launched in 2007, has struggled in its earliest tests to deliver on its promise. When, after 10 years of existence, the first cohort of borrowers became eligible to have their loans discharged under the program in 2017, 99% of the applications were denied.
Some who watch the program closely had hoped that in the years following the initial cohorts of applicants, the share of those approved for relief under PSLF would grow.
One of the main reasons for this prognosis: in the first few years of the program, the type of federal student loan most borrowers were issued isn’t eligible for forgiveness under PSLF unless a borrower consolidates their debt.
The first cohort of borrowers became eligible to have their loans discharged under the program in 2017, 99% of the applications were denied.
Borrowers who took out student loans from 2010 on, and so who would first be eligible for forgiveness under PSLF in 2020, were only issued the type of loan that qualifies for the program.
For Frotman, the improvement in numbers isn’t an excuse for the harm borrowers have already experienced. As the student loan ombudsman at the Consumer Financial Protection Bureau, he warned of potential challenges facing PSLF before the first cohort became eligible for forgiveness.
In addition, the GAO report released Thursday, indicates that many of the obstacles applicants in those first cohorts faced accessing forgiveness persist. The Department of Education didn’t immediately respond to a request for comment on the report.
In his response to the GAO, Mark Brown, a Betsy DeVos appointee who was the chief operating officer at Federal Student Aid in the Department of Education before stepping down in March, said the agency concurred with the GAO’s suggestions. He also highlighted steps the agency has taken to simplify PSLF, including creating a database borrowers could use to see if they work for an eligible employer.
On the campaign trail, President Joe Biden vowed to “make loan forgiveness work for public servants,” and advocates have been pushing the administration to deliver.
Promise is simple, but accessing relief can be challenging
While the idea and promise of Public Service Loan Forgiveness is relatively simple — work for 10 years in public service, pay your student loans for that period and have the remaining balance discharged — actually getting the relief can be complicated.
Only Direct Loans are eligible for PSLF, but borrowers with Family Federal Education Loans can consolidate their debt into Direct Loans to become eligible for relief. For years, borrowers and advocates have said student-loan servicers — companies that are paid by the government to manage the student loan repayment process — aren’t providing borrowers with enough or the right information to take advantage of this option.
That means that in some cases, borrowers are working in public service jobs and paying down their student debt, assuming they’ll be eligible for relief, only to find out after several years of payments that those efforts didn’t count towards the program.
In his response to the GAO report, Brown hinted that some of the Department of Defense personnel who applied for forgiveness, but were rejected are in this situation.
Eighty percent of the applicants who were rejected didn’t have a Direct Loan that had been in repayment for at least 10 years, he wrote, adding “though some of these borrowers may have been in repayment in the FFEL program for that period of time.”
‘Complete indictment of the larger program’
It is “a complete indictment of the larger program” that borrowers who are clearly eligible for Public Service Loan Forgiveness are struggling to access promised relief, Frotman said.
“It is clear that if you cannot get it right for people who are literally serving our country on active duty, it is now beyond question that you are also completely incompetent when it comes to everybody else,” he said.
‘If you cannot get it right for people who are literally serving our country on active duty, it is now beyond question that you are also completely incompetent when it comes to everybody else.’
The GAO suggested that the Department of Education take steps to provide the Department of Defense with more information about eligible employees and those who have taken steps to pursue the program. The agency also recommended the Department of Defense provide more information to its personnel about PSLF.
But Frotman and other advocates have called on the Biden administration to go further. A coalition of 97 organizations sent a letter to Secretary of Education Miguel Cardona earlier this week calling on the Department to cancel the student debt of those who worked in public service for at least 10 years.
For those who are currently serving or have served in the military, Frotman said the government should leverage its data on who has federal student loans and who has served to ensure that those periods of service count towards eligibility for forgiveness.
“For anyone who has served for 10 years, it’s wiping out their loans tomorrow,” he said.
Frotman, who before working as the CFPB’s student loan ombudsman was a senior advisor to Holly Petraeus, then-assistant director for servicemember affairs at the consumer bureau, called on the Department of Education to have a plan on Cardona’s desk to fix these issues by the day after the report’s release.
“It’s entirely indefensible,” Frotman said of the challenges military borrowers face accessing student loan relief. “This is the priority, is getting this right on behalf of military families, of dedicated public servants. This needs to be front and center.”