The Department of Education has paused processing student loan forgiveness applications from borrowers who work in public service positions for about two months as it updates its systems and seeks to fix issues affecting its forgiveness program.
The pause for the public service loan forgiveness program began May 1, the department’s Office of Federal Student Aid said. Borrowers can still submit applications and all other forms, such as those documenting their eligibility, but they will not be processed until the pause ends in July, the office said.
As part of a long-planned effort, the Department of Education is moving management of some aspects of the forgiveness program from a contractor’s website to a central dashboard on StudentAid.gov, the federal financial aid portal, so that borrowers can easily catch up. updated information on his condition, the department said. In a recent blog post, he called the changes “an exciting and necessary step” that would lead to faster app reviews.
During and after the pause, the 2.2 million borrowers working toward loan forgiveness in the public service program will continue to make loan payments on their assigned loan servicer’s website, the department said.
Millions of people began resuming regular payments on their federal student loans just a few months ago, after a three-year pause due to the pandemic.
Alpha S. Taylor, an attorney with the National Consumer Law Center, said that while some changes had been anticipated, the pause in processing was unexpected. She said it was concerning because some borrowers might have to delay making financial decisions until later this summer after learning of their eligibility for debt relief. Additionally, she said, a delay can build up during the pause, which will cause further delays when the system restarts again.
“Borrowers are worried,” Taylor said.
Created in 2007, the public service program allows borrowers who work full-time in lower-paying government or nonprofit jobs, including teachers, firefighters and members of the military, to eliminate their remaining federal student debt after making payments on time for 10 years (120 payments). But the initiative’s complex rules and years of flawed management have long prevented most borrowers from paying off their loans.
Starting in 2021, the Biden administration took steps to restart the program. The government, for example, offered temporary waivers that gave borrowers credit for loan payments that were previously considered ineligible, and more people began to see relief.
Debt relief granted through the program since October 2021 amounted to $62.5 billion for 871,000 borrowers, the Department of Education said in March. Previously, about 7,000 borrowers had received forgiveness since the program’s inception.
Now, a pause in processing is needed while the department updates its “systems and contact centers to fully streamline and manage” the program through StudentAid.gov, the student aid office said. One benefit of the new agreement, the agency said, is that students will no longer have to change loan servicers when they enter the public service program as they used to do in the past, reducing the chance for errors.
Previously, a single contractor (most recently the Missouri Higher Education Loan Authority, known as MOHELA) administered the program. As of May 1, the contractor no longer does so, but remains a regular servicer of federal student loans for millions of borrowers, according to another blog post. The contractor said the plan to move management of the forgiveness program to the federal website dated back to 2022, before it became administrator.
Separately, the contractor said in an email that it had recommended moving “a small portion” of its borrower accounts to different loan servicers to meet the government’s schedule for system improvements this summer. “We are in communication with these borrowers and are working diligently to ensure a smooth transition of their loans,” he said.
He also said that any report “that this measure is related to any type of sanction or disciplinary action against MOHELA is totally and completely false.” The contractor’s performance has come under scrutiny from the Department of Education, members of Congress and borrower advocates, who contend he mishandled borrower inquiries and calculated incorrect loan payments.
Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group that has criticized the contractor, said the government had suggested on its website that borrowers take screenshots of their account information on the website. of the contractor before the break, a measure that, according to her, seemed “absurd and unreasonable.”
“This sends a pretty strong signal that ‘we anticipate problems,'” he added.
The department, in an email, said the screenshots were “beneficial” because borrowers would not be able to see payment counts or other program information during the processing pause. The student aid office will securely transfer data and testing systems to ensure the program runs smoothly when the pause ends, the department said.
Concerns about the Department of Education’s management of technology have been exacerbated by the troubled rollout of the new version of the financial aid form known as FAFSA, Free Application for Student Financial Aid. A major overhaul aimed at simplifying the form and making aid available to more students ran into numerous snags, delaying students’ ability to see how much financial aid they could receive for college this fall.
Here are some questions and answers about the loan forgiveness program and student loan servicing:
If I submit public service forms during the pause, how will I know if they have been processed?
The Department of Education said it would begin reviewing forms as soon as the transition was complete and that borrowers would be notified by email once their form was processed. Any qualifying payments made during the pause will be applied after the pause ends in July, the department said.
Ms. Yu recommended keeping copies of any records you have and any forms you submit during the pause.
What happens if I reach 120 qualifying payments during the processing pause?
Borrowers who qualify for forgiveness during the pause can request forbearance (a temporary deferral of payments) from their loan servicer, the department said. Any “extra” payments will be refunded to the borrower or applied to other student loans that are not part of the public service program, the department said.
Mr. Taylor recommended that borrowers apply for forbearance if they were “confident” they had made the required 120 qualifying payments. (Administrators will still be able to perform basic functions, he said, such as accepting payments and processing forbearance requests.) If borrowers aren’t absolutely sure, he said, “it’s safer to err on the side of caution” and continue making payments if you can afford it, knowing that any additional payments will be refunded.
Because the public service program is complicated and there have been so many problems with its administration over the years, “few borrowers know with confidence” that their loans will be canceled, Ms. Yu said. And while borrowers are entitled to a refund if they continue making payments after qualifying for relief, she said, “many borrowers have told us they have had trouble getting their refunds.”
Does the pause in processing affect other federal student aid programs?
Yes. The pause also affects the Teacher Education Assistance for College and Higher Education, or TEACH, program, which provides scholarships to students who agree to teach in low-income or high-need schools. If they do not complete the service requirement, the grant becomes a loan that must be repaid. A pause in this program also began May 1, but will continue into the fall, the student aid office said.