Federal Public Service Loan Forgiveness program expands

While everyone who cares about college loans is talking about President Joe Biden’s debt relief plan, a separate, giant federal college loan forgiveness program is barely known, with less than six weeks left for people to apply. 

It might even rival Biden’s plan in total dollars – and for many borrowers who are paying back their loans, it comes with an Oct. 31 deadline to apply under a temporary waiver.

It’s called the Public Service Loan Forgiveness program, or PSLF, and it’s available for people in public service jobs for at least ten years: school employees, workers in government agencies at any level and people at nonprofit agencies including many, but not all, health care workers.

An agency studying school loans pegs the number of eligible people in Connecticut at 113,500.

And rather than a limit of $10,000 or $20,000, as the Biden plan is offering to all people with college debt who earned under $125,000 ($250,000 for couples filing jointly), the PSLF program forgives all debt.

All debt. That’s an average of $60,000 per borrower nationwide. We don’t know the average college debt load for public service workers in Connecticut but advocates pushing to get the word out say it could be higher.

“Connecticut is a very high debt state,” said Cristher Estrada Perez, executive director of Student Loan Fund, a nonprofit based in New Haven working to reform the student loan system and push for more debt relief.

On Thursday in Hartford, Student Loan Fund held an event to bring awareness to the Public Service Loan Forgiveness program – which started in 2007 under former President George Bush as a way to encourage public service work.

Amazingly, only 1 percent of people eligible for PSLF nationwide have had their loans forgiven.

Eligible Connecticut people could be in line for billions of dollars; there is no estimate of the total.  

Why the low take-up with such a big payoff? Three main reasons: First, the program has never been widely publicized, at least not effectively.  Second, before last year, it was narrower. And third, until last year it basically didn’t work.

Estrada Perez reports that 99 percent of applicants were rejected because the rules were so strict – the type of loan and the repayment plan had to be just so.

One year ago, the U.S. Department of Education, which administers the program, issued a waiver through the White House, which they say makes applying and winning forgiveness a lot easier. Chiefly, the loans can be any federally backed loan, not just the less common direct federal loans; and all types of payback plans are now eligible.  

“It was a disservice to borrowers and so now the government is able to correct that error,” Estrada Perez said.

The catch: That waiver was for just one year and it expires Oct. 31. That means any borrower who might eventually qualify should sign up now. If you’ve worked in a public service job for, say, three years, you’ll be eligible after seven more years on the job – but we don’t know what the rules will look like in the future.

So, if you’re reading this and you know people who might be eligible, tell them immediately – anyone of any age with college loans outstanding, and the ten years do not need to be consecutive.

I’m straining to recall a government program of this size that was so poorly known. We know that very few people have received actual debt forgiveness but we don’t know how many are aware of the program or have applied under the waiver.

Estrada Perez said she was recently at a session for eligible people. “Out of the ten people that were there, six didn’t even know the PSLF even existed,” she said. “Anecdotally we know that the messaging hasn’t gotten to them.”

Student Loan Fund’s outreach is aimed significantly at communities of color, through churches and other faith-based groups and through local organizers.

“It will be a great advantage for the whole population but I think it will have a beautiful advantage for black and brown leaders who are in public service,” she said, “because we don’t have generational wealth.”

Terry Waller, a retired Hartford assistant fire chief, joined with advocates Thursday at a library branch in the capital city. He recently finished paying off about $100,000 of his son’s college loans, which might have been eligible under PSLF because his son works for the city. But Waller isn’t bitter even though he paid $1,500 a month or more for a decade, to speed up the repayment. 

“I’m happy to be done with it and I’m happy to help other people,” Waller said. “It’s not just the debt, it’s the mental anguish of trying to get it paid.”

Like any big government payout, PSLF raises fairness questions. What about the families that took on extra mortgage debt rather than school loans? What about moderate-income people in jobs that aren’t defined as public service, such as private ambulance workers? And of course, what about people who didn’t go to college? 

The answer is, the program advances the social goal of helping well educated people stay in community-focused jobs and it can never be completely fair.   

Estrada Perez was the first in her family to graduate from college. With a degree in history from the University of Saint Joseph in West Hartford, she carries $80,000 in debt – a number that’s right there alongside her name in Zoom calls. Estrada Perez’s mother, an emergency department nurse, graduated after her, and carries $90,000 in debt, some of that to help Estrada Perez pay her college costs.

What’s the program worth in Connecticut? We don’t know exactly because we don’t know how much money borrowers have already paid back. If it were $60,000 for everyone now in eligible jobs, the total could be $6.8 billion. That’s equal to an average of $3,400 for every single household in Connecticut.

By comparison, the Biden debt relief plan is just about the same size: $6.9 billion in Connecticut, based on figures released by the federal government this week showing 454,000 eligible borrowers, 238,000 of whom received Pell grants, making them eligible for $20,000 in relief instead of $10,000.

The PSLF can have a far greater impact on people who get it because it forgives all loans. But it’s a race to the deadline, which thousands of people will miss.

“People who applied before and got denied should reapply,” Estrada Perez said. “If I had a magic wand, I would have pushed this last year.”

For the federal program, go to: www.studentaid.gov.  For information through a coalition including Student Loan Fund, go to www.pslfCT.org.

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