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Consumer Reports applauds Department of Education’s plans for fixing the broken Public Service Loan Forgiveness program

Education Department announces interim reforms for borrowers unfairly denied debt cancellation  

YONKERS, NY —  Consumer Reports praised the Department of Education today for providing relief to student loan borrowers who were unfairly rejected by the Public Service Loan Forgiveness Program (PSLF).  The Education Department announced a number of initial steps it will be taking over the next year to assist public service workers who were denied relief because of poor management of the program by loan servicers.

“So many Americans who dedicated their careers to public service counted on PSLF for relief only to find the odds stacked against them thanks to a host of problems that have plagued the program,” said Chuck Bell, advocacy programs director for Consumer Reports. “Instead of getting their loans erased after a decade of serving their communities, borrowers were left with a pile of debt and broken promises. Today’s action by the Department of Education means that our military service members, teachers, firefighters and other public servants will finally be treated fairly and can get the relief they deserve.”

The PSLF program was established in 2007 to assist dedicated public service workers burdened with student debt. Under the program, borrowers who work full-time at public service or non-profit organizations can qualify for debt forgiveness on their remaining balances after making ten years of on-time monthly payments on their federal direct student loans.

But because of bureaucracy and mismanagement, the Department of Education has rejected 98 percent of the public service workers who have applied to have their debts forgiven.  In most cases, people who thought they were eligible after making 10 years of payments either didn’t have the right type of loan or discovered that their job or payment plan didn’t qualify.

A 2017 report by the Consumer Financial Protection Bureau found a wide range of problems with how loan servicers handle PSLF issues.  Borrowers who filed complaints with the CFPB about the program reported that servicers gave out inaccurate information about qualifying for PSLF, incorrectly processed payments, and bungled job certifications needed to prove they work for a qualifying public sector organization.

To correct these issues, the Department of Education is implementing a number of interim reforms in advance of adopting permanent fixes through a negotiated rulemaking with key stakeholders. These include:

  • Issuing a limited waiver to allow all prior payments made by borrowers working for a PSLF certified employer to count towards forgiveness regardless of the federal loan program or payment plan. Payments that may have been off by a nominal amount or made a few days late will be eligible to count towards forgiveness under the waiver. Borrowers will need to submit a PSLF form by October 31, 2022 in order to receive these benefits.
  • Crediting military service members and federal employees automatically for payments made under the program using federal data matches.
  • Reviewing denied PSLF applications for errors and giving borrowers the ability to have their applications reconsidered