Bill may help millions qualify for popular Public Service Loan Forgiveness Program

  • A dozen Democratic senators introduced a bill on Thursday to overhaul the popular but challenged Public Service Loan Forgiveness Program.
  • The legislation would dramatically expand the pool of student loan borrowers who are eligible to have their debt cancelled.
  • All federal repayment plans and loan types would qualify — and forgiveness would come sooner.
Senator Kirsten E. Gillibrand (D-NY)
Brendan Smialowski | AFP | Getty Images
Senator Kirsten E. Gillibrand (D-NY)

A dozen Democratic senators introduced a bill on Thursday to overhaul the popular but challenged Public Service Loan Forgiveness Program.

The legislation, the What You Can Do for Your Country Act, would dramatically expand the pool of student loan borrowers who are eligible to have their debt canceled.

Sens. Tim Kaine, D-Va., and Kirsten Gillibrand, D-N.Y., led the bill, and Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are among the co-sponsors.

"The current Public Service Loan Forgiveness Program is a bureaucratic nightmare, and the Department of Education is failing to meet its obligation to help ease the student debt burden for our nation's public servants," Gillibrand said in a statement. Gilibrand is running for president in 2020, as are Warren and Sanders.

The current government program, signed into law by President George W. Bush in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 10 years of on-time payments.

In 2013, the Consumer Financial Protection Bureau estimated that one-quarter of American workers could be eligible. However, the program has been plagued by problems. The bureau has since found that student loan servicers delay or deny borrowers access to the program by failing to provide them with accurate and complete information about its requirements.

As a result, many people in public service jobs believe that they're paying their way to loan forgiveness only to discover at some point in the process that they don't qualify for one technical reason or another. Often, their loan type or repayment plan was ineligible.

The Education Department recently released data on how many borrowers' loans it has forgiven under the program — just 206. More than 41,000 people have applied.

The new legislation would make all federal loans eligible for the program. Under the current law, borrowers in the Federal Family Education Loan (FFEL) Program do not qualify.

In addition, all federal repayment plans would be eligible for the relief. There are some 14 ways to repay your student loans, but to qualify for public service loan forgiveness you currently need to be enrolled in one of the four income-based programs.

Secretary of Education Betsy DeVos
Jabin Botsford | The Washington Post | Getty Images
Secretary of Education Betsy DeVos

The legislation also would require the Education Department to provide borrowers with better information about the program and to simplify the application process.

One of the most notable changes: Borrowers would no longer have to wait a decade to get relief on their loans. They could have half of their loans forgiven after five years.

That shorter timeline could bring more people into public service work, said Mark Kantrowitz, a student loan expert.

"People who might not be willing to commit to something for 10 years might nevertheless be willing to commit for five years," Kantrowitz said.

The overhaul may have an immediate cost of between $2 billion and $3 billion, and could increase the program's budget by more than $10 billion over the next decade, according to Kantrowitz.

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What you need to qualify for public service loan forgiveness
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Education Dept. fails on public service loan forgiveness: Senators