You Thought Your Student Loan Was Forgiven? Think Again! This New Administration is Reneging
In an appalling development, the US Department of Education is reversing its position on a student loan forgiveness program that was instituted in 2007 as the result of bi-artisan legislation passed at that time. In a NYTimes article today, Stacy Cowley reports:
In a legal filing submitted last week, the Education Departmentsuggested that borrowers could not rely on the program’s administrator to say accurately whether they qualify for debt forgiveness. The thousands of approval letters that have been sent by the administrator, FedLoan Servicing, are not binding and can be rescinded at any time, the agency said.
The filing adds to questions and concerns about the program just as the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts.
How many will be affected by this? According to the article 550,000 individuals who work either for the government or for non-profits received approval from the program’s administrator over the past ten years… and up to 25% of the work force may be qualified as well:
The forgiveness program offers major benefits for borrowers, advocates say, to the point of persuading some people to take public service jobs instead of more lucrative work in the private sector. 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. The federal government approved the program in 2007 in a sweeping, bipartisan bill.
About 25 percent of the nation’s work force may qualify for the program, the Consumer Financial Protection Bureau estimated. Eligibility is based on a borrower’s employer and whether it meets the program’s rules, not on the specific work an applicant does.
Of that group, those working in non-profits seem to be most at risk since that seems to be the group particularly targeted by USDOE. And why would the Federal government agency administering these loans suddenly decide to renege? Linda Klein, president of the American Bar Association has a theory. She called the department’s response”
…“illogical, untenable and bewildering.” An unreliable certification system “exposes those undertaking public service work — exactly what Congress intended them to do — to crippling financial risk,” she said.
So now idealistic individuals with medical and law degrees who decided to accept low wage assignments in the non-profit and government might be on the hook for loans in excess of $100,000. The drowning of the government in a bathtub is proceeding apace.