Saturday, April 1, 2017

The Public Service Loan Forgiveness Program

Always read the Business Section, kiddos.  Beyond the outrages we all expect - Steve Bannon et al. being insanely wealthy for instance, the Russia / Wiretapping talk being a bunch of total hoo-hah, and so forth - there are often overlooked, genuine, honest-to-goodness outrages hiding in plain sight.

For instance, the Department of Education may be invalidating claims submitted under the Public Service Loan Forgiveness Program, effectively destroying the personal finances of anyone who's signed up for public service under the assumption that their student loans would be forgiven.

The bulk of this blog post is derived from this NYT article and this Forbes article.  (For the record, the Forbes article takes a much more generous view of what is likely to happen to the people getting the shaft from the Dept. of Education than I do.)

What is the Public Service Loan Forgiveness Program?  It is a program created on a bipartisan basis in 2007 - the end of the W. Bush years - that allows you to have your student debt forgiven if you meet the following criteria: (1) you work in public service, i.e., at a job that pays far less than its private sector equivalent, for ten years or longer, and (2) you make 120 eligible on-time payments.

In other words, it isn't a "get out of jail free" card for student debt - you must take a lower-paying job than you would otherwise for an entire decade of your life, and furthermore, you must make payments that entire time.

But if you do that, your student debt is forgiven!  If it sounds like a tremendous win-win for both public service and for countless young professionals who can, with their student loan forgiven, following ten years of public service, leave public service for the private sector (and an accompanying larger paycheck), with their old public service roles filled by a new generation of Americans benefitting from the Public Service Loan Forgiveness Program, that's because... drum roll please... it is a win-win!!!

Staggeringly, 25 percent of the nation's workforce may qualify for the program.  But have you ever heard of it?  I had barely heard of it myself.  It's certainly not something that's talked about very often, and unsurprisingly, less than 553,000 people have taken advantage of it.

Those 553,000 people may be in the process of getting totally screwed over by the Dept. of Education, however, which has recently taken to reversing the certifications issued to participate in the program - leaving people who deliberately chose lower-paying public service jobs over higher-paying private sector jobs for years on end with a sudden new burden of debt they had not been counting on.

The Department of Education has issued no reason as to why certifications issued to student debt holders under the program are now being reversed (emphases added mine):

[Jaime Rudert, now plaintiff in a suit against the Dept. of Education] submitted the certification form in 2012 and received a letter from [FedLoan Servicing, administrator of the Pubic Service Loan Forgiveness Program] affirming that his work as a lawyer at Vietnam Veterans of America, a nonprofit aid group, qualified him for the forgiveness program. But in 2016, after submitting his latest annual recertification note to FedLoan, he got a denial note.

The decision was retroactive, he was told. None of his previous work for the group would be considered valid for the loan forgiveness program.

What changed? Mr. Rudert said he did not know. After filing a complaint with the Consumer Financial Protection Bureau, he received a reply from FedLoan saying that his application “had initially been approved in error.” He has not been told what the error was, and has not found any way to appeal the decision. (NY Times)

Who is responsible for this turn of events?  Someone at FedLoan?  Someone higher up at the Department of Education?

Even if the program were to never expand to include the one in four Americans it might benefit, there's still more than half a million people getting screwed here to the tune of many, many thousands of dollars.  Their whole lives' financial planning has been thrown a serious and unexpected curveball, as a result not of a market downturn or natural disaster, but an outright lie

Lest you think this is a story of screwing over 553,000 lawyers (those shysters!), rest assured:

The program generally covers people with federal student loans who work for 10 years at a government or nonprofit organization, a diverse group that includes public school employees, museum workers, doctors at public hospitals and firefighters. (NY Times)

The chicanery of the Dept. of Education may not issue from a directive from President Trump himself.  I am not advancing that claim.  However, it's happening on his watch and therefore it's his problem.  He'll either deal with it or not.  I would put money on "not," but I'd love to be proven wrong about that.

For now, speaking as someone who worked many years with public-sector attorneys who were earning about as much money as I earn as a secretary in the private sector, my heart goes out to any young well-meaning kid who is getting the shaft as the result of this turn of affairs.  And firefighters!  Good lord.  This country, sometimes.

On another subject, and to close this post out, there's a fine little Krugman vs. Baker spat right now, concerning trade.  I think Baker wins this round.  Both posts are short, and worth your time.  There's one thing Donald Trump is, rhetoric-wise, right on about, and that is that "free trade" has produced a handful of winners and plenty of working-class losers.  It's just a shame that is he is, as many of us suspected from the get-go, all talk and no walk.

p.s.: don't forget the Consumer Financial Protection Bureau.

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