Teachers Union Sues Dept. of Education Over Denied Public Service Loan Forgiveness Claims
Imagine being a schoolteacher, cop, firefighter, social worker or some other public service worker with a big student loan debt. You went into the field a decade ago knowing the pay wasn’t the greatest. But you expected you’d be able to discharge your remaining student loan debt after ten years in public service.
That was the deal.
So you make payments on your loan faithfully for years – in regular contact with your student loan servicer, who tells you repeatedly that you’re on track for meeting the public service loan forgiveness (PSLF) criteria: Ten years of payments on a qualifying student loan while employed with a qualifying government or not-for-profit employer.
And then when you think you’re about to cross the finish line, you get some devastating news from your servicer or the Dept. of Education: DENIED.
You had the wrong kind of loan all along.
That’s what happened to too many teachers, say lawyers from one of the biggest teachers unions in the country. And so they filed suit on behalf of their members.
The American Federation of Teachers filed a federal suit in Washington, claiming that the Department of Education has mismanaged the Public Service Loan Forgiveness program for years. They claim that the Department of Education denied its members their Constitutional right to due process.
They claim that the process by which the Department of Education reviews its PSLF applications is error-prone, and appeal mechanisms are inadequate. The AFT is accusing the Department of Education “gross mismanagement and out-and-out sabotage of the federal Public Service Loan Forgiveness Program.”
“Instead of guiding borrowers toward more efficient payoff plans and debt forgiveness through PSLF, the companies withhold information and mislead borrowers so that the loan servicers can continue to collect payments and mounting interest,” Said the AFT in a statement. “Their greed has cost borrowers unfathomable amounts of money in interest, and DeVos has ignored the companies’ deplorable behavior—despite the fact they are under contract with and overseen by her department.”
The lawsuit, Weingarten v. DeVos, was brought by eight AFT members, AFT President Randi Weingarten, and the National Teachers Union. It seeks immediate loan forgiveness and a court order requiring the Education Department to adopt a process to identify and account for its errors and loan servicers’ misrepresentations.
The Public Service Loan Forgiveness Program
Congress created the Public Service Loan Forgiveness Program some twelve years ago, in 2007. The first batch of applicants who believed they had ten years of qualifying loan forgiveness payments started forwarding their applications at the end of 2017 and in 2018. But only a tiny fraction of these applicants actually received the forgiveness they thought they were promised. As of March 31st, only 864 of the 86,006 PSLF applications thus far received were actually approved. Some borrowers had multiple applications approved, so the total number of unique borrowers who successfully applied was 518, out of the 73,554 unique borrowers who applied for PSLF.
10,004 were still being processed at the time the report was closed.
The most common reasons:
- 53% didn’t have 10 full years of qualifying payments or were in an ineligible payment plan for at least part of that period.
- 25% had missing information/incomplete applications.
- 16% had ineligible loans, such as the FFEL loans that were prominent prior to 2010.
- 2% had a problem with employment dates.
- 2% had employers that were not eligible.
The average amount forgiven per approved borrower under the program was significant: $59,244.
The lawsuit is lead by eight plaintiff teachers, in addition to the union. The suit follows a scathing report from the Education Department’s own Inspector General earlier this year.
Eight Teachers, Eight Stories.
According to AFT filings, Each of these eight teachers either received bad information from poorly-trained student loan servicer employees, or had their applications improperly denied, and their appeals refused or ignored.
Specifically (citing the court filing),
- Cynthia Miller, a Chicago Public Schools teacher, submitted a PSLF application in May 2018. ED delayed consider- ation of her application repeatedly because the servicer of her loans erroneously claimed her application was “incomplete,” eventually denied it for failure to make 120 qualify- ing payments (another error), and then denied Ms. Miller’s TEPSLF application. In response to her repeated inquiries about the reason for the denials, Ms. Miller received at least a dozen responses with completely different—and in- correct—counts of her qualifying payments (including one count of 128 payments—eight more than the requisite number). Finally, the servicer mailed her multiple envelopes containing over 160 pages of indecipherable numbers and codes and informed her that her inquiry had been closed.
- ED [Education Department – ed.] denied the PSLF and TEPSLF applications of Crystal Adams, a U.S. Department of the Treasury employee, stat- ing that she had only made 113 of the 120 required pay- ments. After Ms. Adams made seven additional payments, ED again denied her application for TEPSLF. When Ms. Adams asked the servicer of her loans why she did not qualify, the servicer gave her a series of conflicting answers with payment counts that fluctuated for unexplained reasons and ultimately told her that it did not know how TEPSLF payments are counted but would check and get back to her. Ms. Adams never received a response. Ms. Adams submitted another application for PSLF and again was denied.
- After making 120 on-time payments on her Direct Loans while on a qualifying repayment plan, public school teacher Connie Wakefield applied for PSLF in October 2017. The servicer of her loans informed her that she had made 120 qualifying payments and was eligible for loan forgiveness under PSLF. ED nonetheless denied Ms. Wakefield’s ap-plication for PSLF. Ms. Wakefield has applied multiple times after this initial denial, and ED continues to deny her requests for forgiveness. For nearly two years, Ms. Wakefield has called the servicer asking for an explanation and has received none. Instead, the servicer has only repeated that it would place her account under review. The“reviews” have provided only conflicting, inconsistent, and erroneous payment counts.
- Deborah Baker, a Director of Education at an Oklahoma nonprofit organization, was assured by the Title IV servicer of her loans for nine years that she would qualify for PSLF if she made on-time payments on her income-driven repay- ment plan. That was wrong. Only Direct Loans qualify for PSLF, and Ms. Baker should have converted her Federal Family Education (“FFEL”) Loans to Direct Loans to qualify for loan forgiveness. ED subsequently denied Ms. Baker’s applications for PSLF and TEPSLF.
- Janelle Menzel, a Minnesota public school teacher, asked the Title IV servicer of her loans how to qualify for PSLF shortly after the program began. The servicer directed her to make payments on her existing plan while working for a qualifying employer and gave her counts of qualifying pay- ments as she continued repayment. That was wrong. Ms. Menzel was not repaying her loans on an eligible repay- ment plan. The servicer then processed her application for a federal Teacher Loan Forgiveness award but failed to tell Ms. Menzel that it would render four years of her payments ineligible for PSLF. Years later, only when she reached out to confirm that her employer qualified for PSLF, did the Title IV servicer tell her for the first time that she was not on a qualifying plan and that none of her payments counted for PSLF. When Ms. Menzel subsequently applied for TEPSLF, the servicer told her for the first time that only payments made after 2011 would count for TEPSLF be- cause of her Teacher Loan Forgiveness award. After ED denied her TEPSLF application, the servicer told Ms. Menzel she should simply “give up” on obtaining loan forgiveness.
- Kelly Finlaw, a New York public school teacher, had both FFEL Loans and Direct Loans. When Ms. Finlaw informed the Title IV servicer of her loans that she intended to apply for PSLF, the servicer told Ms. Finlaw that she would qualify for PSLF in October 2017 and should continue making payments until she submitted her PSLF application. That was wrong. Her FFEL Loan did not qualify for PSLF, and she would not have made 120 payments on her Direct Loans to be eligible for forgiveness by October 2017. After she made 120 payments on her FFEL Loan, the servicer still said—erroneously—that she was eligible for PSLF and should go into forbearance because her loans would be forgiven. After her PSLF application was denied because shehad the “wrong” loans, the servicer told Ms. Finlaw that she should consolidate her FFEL Loans and Direct Loans. By doing so, Ms. Finlaw lost almost five years of PSLF-qualifying payments on her Direct Loans.’
- Dr. Michael Giambona, a California public school psychologist, asked the Title IV servicer of his loans how to qualify for PSLF shortly after the Program began. The servicer assured Dr. Giambona multiple times that so long as he continued working for a qualifying employer, he simply needed to continue making payments on his loans and then check back after ten years. In fact, Dr. Giambona had a nonqualifying FFEL loan and should have consolidated that loan into a Direct Loan. ED subsequently denied Dr.Giambona’s applications for PSLF and TEPSLF.
- Dr. Michael Giambona, a California public school psychologist, asked the Title IV servicer of his loans how to qualify for PSLF shortly after the Program began. The servicer assured Dr. Giambona multiple times that so long as he continued working for a qualifying employer, he simply needed to continue making payments on his loans and then check back after ten years. In fact, Dr. Giambona had a nonqualifying FFEL loan and should have consolidated that loan into a Direct Loan. ED subsequently denied Dr.Giambona’s applications for PSLF and TEPSLF.“
“Public Service Loan Forgiveness is a right, but Betsy DeVos has turned it into a crapshoot,” said Randi Weingarten, President of the American Federation of Teachers in a release.
Jason Van Steenwyk is an experienced financial industry reporter and writer. He is a former staff reporter for Mutual Funds, and has been published in SeekingAlpha, Nasdaq.com, NerdWallet, Value Penguin, RealEstate.com, WealthManagement.com, Senior Market Advisor, Life and Health Pro and many other outlets over the past two decades. He is also an avid fiddle player and guitarist. He lives in Orlando, Florida.