The Education Department has paused processing applications for student loan forgiveness from borrowers who work in the public sector for about two months as it updates its systems and tries to fix the problems plaguing its forgiveness program.
The pause for the public service loan forgiveness program began May 1, the department’s Office of Federal Student Aid said. Borrowers can still submit applications and all other forms, such as those documenting their eligibility. However, these will not be processed until after the break ends in July, the office said.
In a long-planned initiative, the Education Department is moving management of some aspects of the forgiveness program from a contractor’s website to a centralized dashboard on StudentAid.gov, the federal financial aid portal, so borrowers can easily stay informed. date information on their status, the department said. In a recent blog post, it called the changes “an exciting and necessary step” that would lead to faster review of applications.
During and after the pause, the 2.2 million borrowers eligible for loan forgiveness under the public service program will continue to make their loan payments on their assigned loan servicer’s website, the department said.
Millions began making regular payments on their federal student loans just a few months ago after a three-year pause due to the pandemic.
Alpha S. Taylor, staff attorney at the National Consumer Law Center, said that while some changes were expected, the pause in processing was unexpected. He said it’s concerning because some borrowers may have to delay their financial decisions until later this summer after learning whether they qualify for debt relief. Additionally, there could be a backlog during the pause, which could cause more delays when the system restarts, he said.
“Borrowers are worried,” Mr Taylor said.
The public service program, created in 2007, allows borrowers who work full-time in lower-paying government or nonprofit jobs, including teachers, firefighters and military personnel, to pay off their remaining federal student debt after making on-time payments for 10 years years (120 payments). But the initiative’s complex rules and years of mismanagement have long prevented most borrowers from canceling their loans.
As of 2021, the Biden administration took steps to restart the program. For example, the government offered temporary waivers that gave borrowers credit for loan payments previously considered ineligible, and more and more people saw relief.
Debt relief provided under the program since October 2021 totaled $62.5 billion to 871,000 borrowers, the Education Department said in March. Previously, approximately 7,000 borrowers had received forgiveness since the program’s inception.
A pause in processing is now required while the department updates its “systems and contact centers to streamline and fully administer the program through StudentAid.gov,” according to the Office of Student Aid. One advantage of the new rule, according to the agency, is that students will no longer have to change loan servicers when they enter public service, as was often the case in the past, reducing the likelihood of errors.
Previously, the program was administered by a single contractor – most recently the Missouri Higher Education Loan Authority, known as MOHELA. According to another blog post, the contractor has been gone since May 1 but remains a regular servicer of federal student loans for millions of borrowers. The contractor said the plan to move administration of the forgiveness program to the federal website was dated to 2022 before he took over.
Separately, the contractor said in an email that it had recommended transferring “a small portion” of its borrower accounts to other loan servicers to meet the government’s timeline for system improvements this summer. “We are in contact with these borrowers and are working diligently to ensure a smooth transition of their loans,” it said.
It also said that any reports “saying that this move is related to any penalty or disciplinary action against MOHELA are completely false.” The contractor’s performance has been scrutinized by the Department of Education, members of Congress and borrower advocates who claim he processed borrower requests incorrectly and calculated incorrect loan payments.
Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group that has criticized the contractor, said the government had suggested on its website that borrowers should take screenshots of their account information on the contractor’s website before the break – a step that she said , she found it “absurd and unreasonable.”
“It sends a pretty strong signal that we anticipate problems,” she added.
The department said in an email that screenshots are “beneficial” because borrowers cannot see their payment count or other program information during the processing pause. The Office of Student Aid will securely transfer data and test systems to ensure the program runs smoothly after the break ends, the department said.
Concerns about technology management at the Department of Education have been heightened by the problematic rollout of the new version of the financial aid form, known as FAFSA, for free application for college aid. A major overhaul to simplify the form and give more students access to funding faced numerous hurdles, preventing students from seeing how much financial aid they could receive for their studies this fall.
Here are some questions and answers about the loan forgiveness program and student loan processing:
If I submit civil service forms during the break, how do I know if they have been processed?
The Department of Education said it will begin reviewing forms once the transition is complete and that borrowers will be notified by email once their form is processed. Any qualified payments made during the pause will be applied after the pause ends in July, the department said.
Ms. Yu advised keeping copies of all documents and forms you submit during the break.
What happens if I reach the qualifying 120 payments during the processing pause?
Borrowers who qualify for forgiveness during the pause can request forbearance — a temporary payment deferral — from their loan servicer, the department said. Any “additional” payments will be refunded to the borrower or applied toward other student loans that are not part of the public service program, the department said.
Mr. Taylor recommended that borrowers apply for forbearance when they are “confident” they have made the required 120 qualifying payments. (Service providers will still be able to perform basic functions such as accepting payments and processing forbearance requests.) Unless borrowers are absolutely sure, it is “safer to be safe” and continue making payments, said he can afford it, knowing that any overpayments will be refunded.
Because the public service program is complicated and there have been so many problems with its administration over the years, “few borrowers know with confidence” that their loans will be canceled, Ms. Yu said. And while borrowers are eligible for a refund if they continue to make payments even after becoming eligible, she said, “Many borrowers have told us that they have had difficulty receiving their refunds.”
Does the processing pause impact other federal student aid programs?
Yes. The pause also affects the Teacher Education Assistance for College and Higher Education (TEACH) program, which provides grants to students who agree to teach in low-income or high-need schools. If they do not fulfill their official obligation, the grant becomes a loan that must be repaid. A pause for that program also began May 1 but will last through the fall, the student aid office said.
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2024-05-10 13:00:10
www.nytimes.com
