Congress created the Public Service Loan Forgiveness Program (PSLF) to provide student loan discharges to those who work in the public interest, such as for a government agency or a nonprofit organization. For example, if you’re a full-time employee of a public school system, your employment would meet the requirements for PSLF, regardless of whether you’re a teacher, administrator, or support staff. Under this program, the remaining balance on your eligible loans is forgiven after you make 120 qualifying monthly payments under a qualifying repayment plan while working full-time for a qualifying employer.
More than 90% of applicants, however, have been rejected for loan forgiveness in recent years. Borrowers have alleged in numerous lawsuits that their loan servicers failed to inform them about program requirements, which led to denials. For example, in October 2018, members of the American Federation of Teachers union filed a lawsuit alleging that Navient (their loan servicer):
- failed to inform them of the forgiveness program
- failed to place borrowers in the best possible payment plan to qualify for forgiveness, and
- harmed public servants by routinely providing false information to them. (Hyland et al. v. Navient Corp. et al., United States District Court for the Southern District of New York, No. 18-cv-9031.)
The plaintiffs said that Navient’s actions—and inactions—resulted in loan forgiveness denials. While the judge in the case dismissed most of the plaintiffs’ claims in 2019, noting that many of them were too vague or lacked documentation, she preliminarily approved a suit settlement on June 19, 2020. Under the terms of the settlement, Navient agreed to, among other things, enhance its internal practices and policies. The company will provide additional training to customer service representatives to listen for indications of potential eligibility for PSLF and provide borrowers with information about the program and how to qualify. It also agreed to update the forms that are sent to borrowers.
In addition, Navient agreed to give more information on the program to those who might qualify for PSLF or direct them to the Federal Student Aid website or FedLoan Servicing (the designated servicer for PSLF). The company further agreed to contribute $1.75 million to a nonprofit organization that provides education and student loan counseling to public service borrowers. And each of the ten plaintiffs in the case will receive $15,000.
Final approval of the agreement is expected within the next few months and will bring the lawsuit to a close.
If you’re hoping to qualify for loan forgiveness under PSLF, you should complete and submit an Employment Certification Form to the Department of Education annually and whenever you change employers to make sure you’re on track to receive forgiveness. You can also use this tool to assess whether your employer and loans qualify for PSLF, and get assistance in completing the required forgiveness application forms.