“This is just a cruel joke on Teachers. We were promised something that was going to allow us to breathe freely,” city Teacher Kelly Finlaw said of the student-loan-forgiveness program enacted by Congress more than a decade ago that has so far provided relief to less than 1 percent of eligible public-sector workers.
She is one of eight public servants represented in a lawsuit that was filed in Federal court by the American Federation of Teachers against the U.S. Department of Education, as well as Education Secretary Betsy DeVos, for “grossly” mismanaging the Public Service Loan Forgiveness program, which was established in 2007 in order to attract people into teaching, firefighting and other municipal jobs by promising to forgive the balance on their Federal student loans after 10 years of payment.
Slow to Forgive
Since October 2017, the Education Department has received 73,554 applications for the program. But as of March of this year, just 518 people who’ve applied for loan forgiveness have received it. The Consumer Financial Protection Bureau has estimated that 32 million borrowers were eligible for potential relief.
The lawsuit alleged that the Education Department “knows of—but completely disregards—repeated misrepresentations made by servicers to borrowers who are attempting to qualify...resulting in unwarranted denials of loan forgiveness.”
Applicants have often been denied for having the wrong type of loan: only those with Direct Loans, which are funded directly through the Federal government, are eligible for the program.
Ms. Finlaw, an Art Teacher at I.S. 528 in Washington Heights with 13 years’ experience, had both Direct Loans and loans through the Federal Family Education Loan (FFEL) program, which are insured through the Federal Government but privately funded.
Servicer Kept Her in Dark
She began repaying her FFEL loan in February 2007, and her Direct Loan in 2013. But Ms. Finlaw said she was not informed by her loan servicer, Nelnet, that her FFEL loan would not be eligible for forgiveness, and that she should have consolidated that loan into a Direct Loan.
After thinking she was on track for a decade, her application was rejected by the Education Department in October 2017. Nelnet then advised her to consolidate her loans, according to the lawsuit—but what it didn’t tell her was that by doing so, the five years of payments she’d made on her Direct Loan would no longer count, meaning she’d have to make another 10 years of payments in order to be eligible for relief.
“If this program was meant to protect public servants, then someone would have told me when I started paying that one of my loans wasn’t qualifying,” Ms. Finlaw said during a July 17 phone interview. “I’m going to be paying this back for the rest of my life.”
Many borrowers were denied loan forgiveness because the Education Department incorrectly counted the number of payments they’d made, the lawsuit alleged. For example, Cynthia Miller, who works as a Teacher in the Chicago Public School system and consolidated her loans in 1998, was told last year by the Education Department that her application was rejected because she’d made just one of the 120 required payments on each of her four loans. When she applied again a few months later, the department stated she’d made no payments, according to the complaint.
‘Debt a Major Burden’
The AFT, which represents more than 1.7 million Teachers, paraprofessionals, nurses and other education and health care staff, decided to sue because student loan debt was a roadblock for many of its members. In a survey given to 2,600 members last year, eight out of 10 respondents said that their student-loan debt was a “major burden or challenge.” Although the union launched student loan clinics to help its members understand the program, that was no longer enough.
“We didn’t want to just help people navigate a broken system but get them relief while holding people responsible,” said the union’s president, Randi Weingarten, during a phone interview.
“What we’re hoping for from this lawsuit is that the DeVos administration gives people the relief they need,” she said. “The fact that the Education Department won’t do it themselves, I can’t tell you how outrageous it is.”
The Education Department pointed to a tool it launched late last year on its website to help borrowers better understand the program. “The department is faithfully administering the complex program Congress passed,” Press Secretary Liz Hill said in a statement.
Seeks Appeals Process
The union wants the department to establish an appeals process for those who believe they were unfairly denied, and to provide applicants with an explanation detailing how it reached its decision.
“People are at their wits’ end. I can’t tell you the level of frustration when they pay 10 years then get rejected and they’re on the phone constantly trying to figure out why,” said Ms. Weingarten. “Student loan debt is crushing, whether someone is paying $100 a month or $1,500 a month.”
Ms. Finlaw has $88,000 of remaining debt, and said that her $600-a-month payment toward her student loans has prevented her from saving money or being able to buy a home. It has also forced her to lower her retirement contribution. She hopes that if a judge sides with the union, loan servicers that have misinformed borrowers will be held accountable.
‘DeVos Not for Us’
“As a Teacher, what happens in the classroom is a reflection of me and is my responsibility. Betsy DeVos is in charge of the Department of Education: what happens in the department is a reflection on her and she’s not looking out for those in this program, nor for Teachers,” she said.
But more importantly, Ms. Finlaw wants the loan-forgiveness program to finally live up to its promise.
“I hope that the people who have just started paying off their loans won’t have to deal with this in 10 years,” she said. “I hope that they will have their debt eliminated and get a letter saying ‘thank you for your service.’ ”
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