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Westlake Legal Group > Posts tagged "FedLoan Servicing"

Broken Promises and Debt Pile Up as Loan Forgiveness Goes Astray

Westlake Legal Group 00dc-FORGIVENESS1-facebookJumbo Broken Promises and Debt Pile Up as Loan Forgiveness Goes Astray United States Politics and Government Student Loans Pennsylvania Higher Education Assistance Agency Financial Aid (Education) FedLoan Servicing Education Department (Ind) American Federation of Teachers

WASHINGTON — When Congress created a student loan forgiveness program in 2007, lawmakers wanted to draw people to vital but relatively low-paid careers with a promise: after a decade, if borrowers faithfully paid their debts and pursued their work, they would have the remainder of their student loans written off.

Since then, tens of thousands of graduates were led to believe by their student loan servicers that they would qualify for relief at the end of a decade, only to be shocked when their applications were rejected.

The blame can be spread broadly — to loan servicers who at best failed to inform borrowers of what was needed to qualify, to the single company in charge of the program that has been repeatedly cited for shoddy service, mismanagement and poor record keeping, to lawmakers who wrote in a baffling list of requirements, and to the Education Department, which has failed to step in and correct the problem.

Those affected are people like Kelly Finlaw, who, for a decade, dreamed of small splurges: a new shower head that did not spray everywhere but her bathtub, coffee from a cafe — maybe even an apartment she would own, rather than rent, near the school where she worked in New York. All of that would be possible, she had thought, once the federal government forgave her student loans.

She called that “the light at the end of the tunnel.” Then, in October 2017, she opened the long-anticipated letter and learned instead that the Education Department said her loans did not qualify. “The light at the end of the tunnel went dark,” Ms. Finlaw said.

Fewer than 1 percent of those who have applied for relief under the Public Service Loan Forgiveness program have been deemed eligible. Lawsuits are proliferating, along with dashed hopes.

“We didn’t create a puzzle or a contest,” Representative Robert C. Scott, Democrat of Virginia and the chairman of the House Education Committee, said in exasperation at a recent hearing on the program. “The odds of somebody getting through this process — they’d be better off buying lottery tickets.”

More than 80,000 professionals like Ms. Finlaw have been denied the promised relief, through bureaucratic snafus, confusion over complex rules or just poor management. The first deadline came and went in 2017, and fewer than 1 percent of the 28,000 applicants received anything. Congress rushed to create an emergency “fix” fund last year — and it too had a dismal 99 percent rejection rate.

The Education Department maintains that it is carrying out the law as passed — and it was messy and filled with complicated requirements that borrowers and lenders have struggled to understand. The vast majority of denials happened because people did not enroll in a loan or repayment plan that qualified, even if their chosen professions did, according to government auditors. Most were not told of the error until the rejection notice’s arrival.

Democrats and other critics say the Education Department has made no effort to improve what is within its control. The single loan servicer hired by the agency to manage the program has gone unpunished, despite years of criticism, according to lawsuits and government audits. That servicer, the Pennsylvania Higher Education Assistance Agency, has been paid $1.3 billion over the past decade.

“In government, you’re actually supposed to solve problems,” said Randi Weingarten, the president of the American Federation of Teachers, which has sued the Education Department. “And when you see that less than 1 percent approval rating, that should be a four-alarm fire.” (Last week, 21 attorneys general — including one Republican, Lawrence Wasden of Idaho — filed a brief supporting the union’s position.)

The warning signs were evident years ago, government records show. The Pennsylvania Higher Education Assistance Agency, which does business as FedLoan, struggled to accurately track borrowers’ qualifying monthly payments, according to quarterly reviews done in 2015 and 2016 by the Education Department. In each of three successive quarters, at least 23 percent of the accounts the agency examined had mistakes.

Audits in 2017 found that the loan servicer still had problems accurately counting loan payments and had mistakenly told some borrowers they were on track to receive forgiveness. But the department did little to correct the issues, according to a report released last month by House Democrats.

Internal Education Department records, obtained by a borrower through a public records request and provided to The New York Times, reveal confusion at both the Education Department and the loan servicer about whether some employers qualified for the program. When mistakes were made, borrowers were left on the hook for debts they had believed would be forgiven.

In October 2007, for example, the loan servicer told an employee of a New York health insurer that the worker’s job qualified as public service work. Nearly a decade later, in May 2017, the Education Department reversed that decision, email records show. (A group of borrowers affected by a similar reversal sued the Education Department. A federal judge ruled this year in their favor.)

The department pointed to a number of efforts underway to improve the problem. The “Next Gen” project — a planned technology overhaul of the agency’s loan servicing system — will, it says, allow for better oversight. This month, Betsy DeVos, the education secretary, personally summoned executives from loan servicers for the first of quarterly meetings about performance standards.

“When servicers fail, we fail, and our customers deserve more,” said a department spokeswoman, Angela Morabito.

Department officials told Congress that they also launched an aggressive information and outreach campaign to better communicate the program’s requirements to borrowers.

In April, the Education Department sent the Pennsylvania Higher Education Assistance Agency a written warning that said its call center performance was “wholly unacceptable.”

Keith New, a spokesman for the loan servicer, said it “believes in” the Public Service Loan Forgiveness program and “works tirelessly to help borrowers navigate the program’s complexities.” He added that the Pennsylvania Higher Education Assistance Agency “services the program in accordance with program rules and federal law.”

Under those rules, some borrowers expect they will die with their debt.

A native of Akron, Ohio, Ms. Finlaw, 36, attended a small, private college in Indiana and then graduate school in Philadelphia, where she earned a master’s degree in urban studies. Raised by a mother who had to work multiple jobs to make ends meet, Ms. Finlaw had no choice but to take out loans to pay for school. She was the first in her family to graduate from college.

She religiously made her payments, provided the paperwork to show she remained a teacher and was repeatedly told that she was on track. When her loan servicer, Nelnet, said in spring 2017 that she was eligible to apply for the loan forgiveness program, Ms. Finlaw did so immediately.

At that point, her loan was transferred to the Pennsylvania Higher Education Assistance Agency, which took charge of the forgiveness process. Weeks later, she was turned down. The Education Department said that some of Ms. Finlaw’s undergraduate loans were the wrong kind — the first time she had been told that, she said.

Nelnet then said she could reconsolidate her debt so all of her loans would qualify. She did so, and has now started the 10-year clock over. A spokesman for Nelnet referred inquiries to the Education Department and did not respond to questions about Ms. Finlaw’s situation.

Ms. Finlaw prides herself on living frugally, with just enough left over from her paychecks for bills and groceries. She still considers her nearly $90,000 debt — and 7 percent interest rate — a small price for her dream job.

“I would do it again if it meant that at 3:05 p.m. every Friday, I can stand in my classroom and sweep my floor, with a great week behind me and another one ahead,” Ms. Finlaw said. “I am not the one that asked for this program. I didn’t dream it up. Someone promised it. All I did was believe it was real.”

When Congress created the loan forgiveness program in 2007, lawmakers kept down its cost by limiting eligibility: Only borrowers with so-called direct loans, issued by the Education Department, would qualify. Far more borrowers had bank loans subsidized by the Federal Family Education Loan program.

In 2010, Congress eliminated that program and made all new federal student loans direct from the government. Suddenly, far more borrowers than Congress had initially intended would be eligible to have their loans forgiven.

But many borrowers with bank loans did not realize that they were ineligible. Their loan servicers did not tell them they needed to consolidate their debt into a new direct loan to qualify.

Congress also mandated that borrowers pay back their loans in a specific way, using a payment program tied to their income. Those on other payment plans were ineligible — and, again, many said they were unaware of the rule.

Under pressure to salvage the effort last year, Congress created the Temporary Expanded Public Service Loan Forgiveness program, a $350 million fund (later doubled) to ensure that borrowers initially deemed ineligible could have their applications reconsidered.

The new program expanded the number of repayment plans eligible, but it was still only available to direct loan borrowers — again cutting out tens of thousands of frustrated applicants. And Congress imposed another hard-to-clear hurdle: Only those who had recently made loan payments for at least as much as they would have owed on an income-linked plan would be eligible.

The Education Department added its own set of bureaucratic tripwires, according to a Government Accountability Office report in September. The department required borrowers to initiate a request via email and to submit a separate application for the original program (even if the applicant knew it would be rejected) before it would consider an application for the temporary program.

So far, 656 people have had their loans forgiven through the temporary program, for a total of $27 million — less than 4 percent of the money Congress allocated.

Ashley Waddell of Fort Collins, Colo., who has spent her career working for nonprofit organizations, was hopeful when she got her rejection letter in June from the original loan forgiveness program because it encouraged her to apply for reconsideration. She had spent years in the wrong repayment plan. Last month, she received a letter from the Education Department telling her, again, that she was not eligible, and again because she was on the wrong repayment plan.

“It almost seems, like by design, they’ve engineered a way to claim that they have a plan in place without actually offering anybody any relief,” Ms. Waddell said.

Erica L. Green reported from Washington, and Stacy Cowley from New York. Anemona Hartocollis contributed reporting from New York.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Your Money: Your Student Loan Servicer Will Call You Back in a Year. Sorry.

The emails started arriving in my inbox from borrowers in the federal Public Service Loan Forgiveness program in late February. Their states of residence — Tennessee, California, Michigan — were all different. So were their jobs — teacher, doctor, member of the military.

But their stories were the same. FedLoan, the servicer the federal government employs to administer the program, had undercounted the payments they had made, sometimes by years. And when they called to request a review, FedLoan told them that it would take a year to sort it all out.

You read that right. A year.

Trying to have kids? Considering buying a house? Pondering your next career move? You’ll need to make those big life decisions without knowing whether your student loan payments will go away in 2021, or five years later instead.

“It is enough to make a grown man cry,” wrote David Russell, a science teacher in Ann Arbor, Mich. Another bewildered borrower, Meghan Keller, a lower and middle school counselor in Washington, D.C., simply asked this: “What in the world is going on over there?”

Here’s what’s going on: The Public Service Loan Forgiveness program is an administrative quagmire unlike nearly anything I’ve covered in a quarter-century as a journalist.

It wasn’t supposed to end up like this. When the program was created in 2007, the big idea was to dismiss the remaining loan balances of government and nonprofit employees after 120 on-time payments. Participants have to be in the right kind of repayment plan with the right kind of loan, and end up at the right servicer: FedLoan.

These rules did not end up being easy to explain or administer. The program became such a mess that Congress stepped in recently with $700 million-plus to try to help people who inadvertently disqualified themselves.

Tales of Woe
The persistent problems with the Public Service Loan Forgiveness program.
A Student Loan Nightmare: The Teacher in the Wrong Payment Plan

Oct. 27, 2017

Westlake Legal Group 28MONEY-1-videoLarge-v2 Your Money: Your Student Loan Servicer Will Call You Back in a Year. Sorry. Student Loans Kaine, Timothy M FedLoan Servicing Federal Aid (US)
How to Apply for the Public Service Loan Forgiveness Fix-It Fund

May 23, 2018

Westlake Legal Group 24edloans-threeByTwoSmallAt2X Your Money: Your Student Loan Servicer Will Call You Back in a Year. Sorry. Student Loans Kaine, Timothy M FedLoan Servicing Federal Aid (US)
The Public Student Loan Forgiveness Rescue Hasn’t Gone Well So Far

Oct. 17, 2018

Westlake Legal Group 18money-promo-threeByTwoSmallAt2X-v4 Your Money: Your Student Loan Servicer Will Call You Back in a Year. Sorry. Student Loans Kaine, Timothy M FedLoan Servicing Federal Aid (US)

Amid this chaos, plenty of borrowers have managed to follow the right-job-right-loan-right-plan rules only to discover that their all-important payment count is off. So they call FedLoan and ask for a review.

I started making inquiries with both the Department of Education and FedLoan about a month ago. Since then, the story that FedLoan has told borrowers has started to change a bit: from a long estimated wait time, to a refusal to render a guess. I asked readers to take careful notes about their conversations.

Nicole Skrzyniarz, a physical therapist who lives in Medford, Mass., said she had been requesting a review since March 2018. But when she asks how long it will take, she gets different answers. “Three months, six more weeks expedited, up to one year and, today, ‘a long time; nobody should have given you a time frame,’” Ms. Skrzyniarz, who works at a nonprofit hospital, wrote in an email last week.

On Wednesday night, Katherine Cejda Bailey, who counsels children and families in a Memphis hospital, pressed a FedLoan phone worker for an updated timeline. She said the representative had told her that even expedited reviews “are taking forever.”

Kyle Stefano, a Sacramento social worker for the homeless, thought FedLoan had botched her initial inquiry. Then, she said, she was told that she shouldn’t bother following up for now because FedLoan was prioritizing reviews for people who have already made 120 payments. The reason: increased media attention. The representative would not offer a timeline for her case. “It’s a mess,” Ms. Stefano told me.

FedLoan’s own phone representatives seem to be losing patience, too, according to an email from Ms. Keller, the school counselor. During a call to FedLoan this week, she asked whether her account would just stay under review until she simply gave up. She said the rep had told her: “That about sums it up. It’s not O.K. how they are treating people.”

I asked FedLoan and the Education Department about these problems. I heard back from the Education Department, which said it would speak for them both. “Any excessive delay in customer service is unacceptable,” the department said.

“We understand the time it takes for borrower accounts to be reviewed is a problem, and we are working with our loan servicers to fix it,” said the department’s press secretary, Liz Hill.

A United States Government Accountability Office report last year enumerated many flaws in the system that could lead to payment miscounts and confusion.

In a budget hearing last month, Senator Jeff Merkley, Democrat of Oregon, grilled Betsy DeVos, the secretary of education, over the sorry state of the Public Service Loan Forgiveness program (and the journey of Jed Shafer, a borrower whose story I chronicled over the last two years). Ms. DeVos said Congress had made it difficult to qualify, while Mr. Merkley insisted that the Education Department wasn’t holding servicers accountable for poor customer service.

Who’s right? The law is indeed complicated. That makes FedLoan’s job difficult, particularly as more people qualify — or want to find out if they do — for a highly popular program. And because of the many moving parts, borrowers may discover that they have misunderstood the rules, or that the servicer has miscounted their payments.

One big problem, Ms. Hill said, is that borrowers often need their previous servicer to transfer payment records to FedLoan. If it’s not in a format FedLoan’s software can read, that creates delays. FedLoan has hired a consulting firm to make the process more efficient, Ms. Hill said.

A bill introduced in the Senate on Thursday could simplify the program. Senator Tim Kaine, Democrat of Virginia, who helped coordinate the proposal for that $700 million-plus in fix-it money, also helped lead the effort on proposed legislation that would allow every federal loan and every federal repayment plan to qualify for the program. Another proposed change: Allow partial loan forgiveness after five years in a public service job.

When I told Mr. Kaine about what I had heard from readers, he did not seem surprised. “I’m incredibly pissed off about it,” he said. “And it’s evidence for my proposition that this is not accidental but an intentional effort to sabotage.”

There’s reason to be concerned. President Trump’s most recent budget suggested dismantling the program altogether. The odds of this happening are low, and borrowers already in the program would almost certainly be grandfathered in if it did. But budgets are a statement of values, and the Department of Education ultimately answers to the president.

Mr. Kaine’s hope is that the new bill could be attached to a reauthorization of the federal Higher Education Act, which may happen this year. If it does, is he confident that FedLoan can follow whatever new regulations survive the legislative gantlet?

“I don’t have confidence that would enable me to celebrate if this thing passes,” he said. “I’m going to feel good if it passes, and then there is going to have to be executive oversight.”

The shame here is that it took a decade to recognize that the program’s dysfunction had become so acute. And even the best legislative developments are only as effective as the people who carry them out.

So I expect that this problem will be with us for a long time. If you’re one of the people doing good work in the world and counting on the program, don’t just trust what you’re told. Print everything. Ask for written verification. And cross your fingers the next time you call for help, and hope the very people who are supposed to be looking out for you won’t tell you to come back in a year.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com