Department of Education: Some Student Loan Forgiveness Program Approval Letters May Be Invalid

Program promises to repay leftover student loans for those working in a public service job for 10 years

Department of Education: Some Student Loan Forgiveness Program Approval Letters May Be Invalid
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March 31, 2017

Thanks to a Department of Education (DOE) filing, more than 550,000 people are now unsure if their student loans will be paid off as they were promised by the federal government.

A Broken Promise?

The program promises that if the person works in a public service job—such as a government or nonprofit position—for 10 years, the government will repay whatever amount remains on that person's student loan balance after that time.

However, the DOE submitted a legal filing last week suggesting that the administrator of the program—FedLoan Servicing—may not be able to accurately say whether or not a person qualifies for forgiveness. According to the agency, the thousands of approval letters that the company has sent out are not binding and can be voided at any time.

The first people scheduled to have their loans forgiven by this program will reach the end of their decade-long commitment in October of this year.

Reversal with No Appeal

So far, four people and the American Bar Association have sued the DOE over this issue in the hope that their eligibility for the program will be re-approved. The plaintiffs took jobs that they were initially told qualified them for the program, only to have that decision reversed at a later time. They claim there was no apparent way to appeal the decision.

"It's been really perplexing," said plaintiff Jamie Rudert. "I've never gotten a straight answer or an explanation from FedLoan about what happened, and the Department of Education isn't willing to provide any information."

The Consumer Financial Protection Bureau (CFPB) estimated that approximately 25 percent of workers may be eligible for the program. Borrowers qualify based on their employers and whether those employers meet the rules of the program. The specific work done by the borrowers does not affect their eligibility.

A Different Choice

Rudert applied for the program in 2012. FedLoan sent him an approval letter stating that his work as a lawyer at nonprofit aid group Vietnam Veterans of America made him eligible. The decision was reversed in 2016, and not only that, but it was retroactive: none of the work he had done for the four years he had worked for the group would be considered valid.

He filed a complaint with the CFPB and got a reply from FedLoan stating that the original approval of his application had been made "in error." He was not—and still has not been—told what the error was, and he has not found any way to appeal.

Rudert owed almost $135,000 on student loans when he graduated from law school. He says that he would have chosen a different employer if he had known that his position at Vietnam Veterans would not be eligible. He now works in almost exactly the same position at Paralyzed Veterans of America, an employer that FedLoan has approved for the program.