Public service workers denied loan forgiveness due to wrong repayment plan given second chance
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The U.S. Department of Education has announced a second-chance plan for people in public service jobs who were denied loan forgiveness because they chose the wrong repayment plan.
On May 23, the department announced the process that allows affected borrowers to ask for reconsideration, report the Wall Street Journal, the New York Times and the Washington Post.
The DOE will use $350 million set aside by Congress in a fix-it fund to help people seeking reconsideration. The money will be distributed on a first-come, first-served basis.
The Public Service Loan Forgiveness program offers forgiveness of loan balances to borrowers who work 10 years in certain nonprofit, public service jobs, as long as payments are made on time.
Borrowers also had to be make payments under a plan tied to income. Some who chose the wrong plan have said they were misled by loan-servicing companies.
People seeking reconsideration because they were in the wrong payment plan can’t apply until they make 120 on-time payments. In addition, their most recent monthly payment before applying for reconsideration and the one made a year before must be at least as high as the amount they would have paid under a correct plan. More information is available here.
ABA President Hilarie Bass applauded Congress for appropriating additional money to correct deficiencies in efforts to educate and certify borrowers in the loan forgiveness program in a March statement.
The American Bar Association sued the Education Department on behalf of four lawyers who were dropped from the program for a different reason. The lawyers were told their eligibility for the program had been revoked because they didn’t work for employers that qualified as public service organizations.
Two of the lawyers worked for the American Bar Association.
The Education Department later revised online forms to say the program applies only to jobs with organizations whose “primary purpose” is either public service or public education.
The second-chance plan does not affect the ABA lawsuit.
