Loan forgiveness programs

[StellaB]

So if that is the case, why would they want to stop someone from going on an income-based plan? Wouldn’t they profit more in the long term from that? They would do best by having people pay less, not more, right?

In theory, they do best the more loans they oversee. Pennsylvania, one of six states suing FedLoan, argues that the servicer manipulated payments (e.g. marking payments as late when they were not), and that when borrowers attempted to get FedLoan to fix its own bookkeeping errors, the servicer automatically put their loans into "administrative forbearance" for months while they fixed the errors. Forbearance automatically kicks the loan forgiveness can down the road. Pennsylvania says FedLoan did this in order to enrich itself by extending the amount of time borrowers have to make payments through FedLoan, for which the servicer receives fees. They benefit from borrowers remaining active (i.e. in payment/forbearance) as long as possible. Once the loan is forgiven, FedLoan no longer receives fees for that loan.

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[Pragma]

In theory, they do best the more loans they oversee. Pennsylvania, one of six states suing FedLoan, argues that the servicer manipulated payments (e.g. marking payments as late when they were not), and that when borrowers attempted to get FedLoan to fix its own bookkeeping errors, the servicer automatically put their loans into "administrative forbearance" for months while they fixed the errors. Forbearance automatically kicks the loan forgiveness can down the road. Pennsylvania says FedLoan did this in order to enrich itself by extending the amount of time borrowers have to make payments through FedLoan, for which the servicer receives fees. They benefit from borrowers remaining active (i.e. in payment/forbearance) as long as possible. Once the loan is forgiven, FedLoan no longer receives fees for that loan.

So, arguably, any forbearance decision benefits the servicer no matter what, hence this particular lawsuit topic.

But, what about in a case like foreverbull indicated? The consequence for not having your paperwork in order for and income-driven plan is to pay the standard 10-year rate (I believe if it is the same as it was before) until the paperwork is in order. So, the servicer messing up the paperwork would yield higher payments. Or, are you thinking that this is a manipulation that would cause a student to request a forbearance?

Also, in the case of income-based payment plans, I'd imagine a good portion of them are due to PSLF, but I'd like to see numbers an how many people in income-driven programs are actually going for PSLF. I'd see income-driven programs as a boon (at least for 20-25 years) for the servicers, assuming that forgiveness is not happening.

I also saw an article (no time to grab it now but can later) that suggested that payment might be a function of the amount of debt serviced, not necessarily the number of participants. Servicers seem to argue that they are losing money when the government adds more work for them without paying them more.

It's an interesting system. I wonder how many students believe that their servicer actually "bought" their debt and are profiting directly from the interest accrued, when in all likelihood the profits are going to the government.

I appreciate a good discussion about all of this. It's a good diversion from all of the real-life work I have to get done.

 

[LadyHalcyon]

https://www-m.cnn.com/2019/03/18/po...n-limit-cap/index.html?r=https://www.cnn.com/

Don't know if this has been posted elsewhere...

 

[Pragma]

https://www-m.cnn.com/2019/03/18/po...n-limit-cap/index.html?r=https://www.cnn.com/

Don't know if this has been posted elsewhere...

Great, a CNN politics article.

You are the OP so I guess the discussion should go where you want it to.

 

[WisNeuro]

Great, a CNN politics article.

You are the OP so I guess the discussion should go where you want it to.

Chihllax, dude, the article is directly related to the discussion at hand.

This is actually something that I agree with the administration about, although it doesn't fix any of the root problem as it only pertains to federal loans it seems. People will just max out their federal cap and then go to what are likely higher interest private loans.

 

[LadyHalcyon]

I agree with it too. Very rare, as I haven't agreed with much this administration has done, or tried to do.

@Pragma wasn't trying to derail, felt it was relevant and that starting a new thread would be redundant. You don't have to discuss it.

Chihllax, dude, the article is directly related to the discussion at hand.

This is actually something that I agree with the administration about, although it doesn't fix any of the root problem as it only pertains to federal loans it seems. People will just max out their federal cap and then go to what are likely higher interest private loans.

 

[LadyHalcyon]

Sure. But those loans don't have IDR or forbearance. They will likely have to pay much more, and much sooner. I think medical students are likely to take that route because they can actually afford the payments.

Chihllax, dude, the article is directly related to the discussion at hand.

This is actually something that I agree with the administration about, although it doesn't fix any of the root problem as it only pertains to federal loans it seems. People will just max out their federal cap and then go to what are likely higher interest private loans.

 

[Pragma]

Chihllax, dude, the article is directly related to the discussion at hand.

This is actually something that I agree with the administration about, although it doesn't fix any of the root problem as it only pertains to federal loans it seems. People will just max out their federal cap and then go to what are likely higher interest private loans.

Caps on loans = good.

Not familiar - what are repayment options at 7.2% for a parent Plus loan?

There will be opponents citing “lack of access to education” or something like that.

 

[WisNeuro]

Sure. But those loans don't have IDR or forbearance. They will likely have to pay much more, and much sooner. I think medical students are likely to take that route because they can actually afford the payments.

The psychology students taking out over 200k in loans most likely are not financially savvy enough to understand those issues enough to stop them from taking out even dumber loans should the federal cap go into effect.

 

[WisNeuro]

Caps on loans = good.

Agree, but you'll never get private lenders to sign on, and we'd never get legislation passed that could compel them. We'd have to limit the federal repayment plans to make any real headway in loans and limiting diploma mills.

 

[LadyHalcyon]

I'm hoping schools will follow suit and lower the cost of tuition. Additionally, recruitment won't be able to rely on fables of PSLF and such. I'm wondering how much of this has to do with Argosy. I remember this administration having a much different response to ITT tech students when their schools closed. DeVos didn't want to provide debt relief. Wasn't there a huge class action lawsuit?

The psychology students taking out over 200k in loans most likely are not financially savvy enough to understand those issues enough to stop them from taking out even dumber loans should the federal cap go into effect.

 

[WisNeuro]

I'm hoping schools will follow suit and lower the cost of tuition. Additionally, recruitment won't be able to rely on fables of PSLF and such. I'm wondering how much of this has to do with Argosy. I remember this administration having a much different response to ITT tech students when their schools closed. DeVos didn't want to provide debt relief. Wasn't there a huge class action lawsuit?

From what I remember, there was a settlement to wipe out what was owed to the school and lenders who still wanted their money. I'm not sure students got anything on top of that.

 

[Pragma]

I'm hoping schools will follow suit and lower the cost of tuition. Additionally, recruitment won't be able to rely on fables of PSLF and such. I'm wondering how much of this has to do with Argosy. I remember this administration having a much different response to ITT tech students when their schools closed. DeVos didn't want to provide debt relief. Wasn't there a huge class action lawsuit?

From what I remember, there was a settlement to wipe out what was owed to the school and lenders who still wanted their money. I'm not sure students got anything on top of that.

This begs the question - who foots the bill for debt relief?

In the Argosy scenario, I imagine this will come up. Those programs had accreditation. Who bears responsibility for relieving debt? Also, what about prior students? What about students who started there, realized it was a bad deal, cut their losses, then had to start paying?

 

[WisNeuro]

This begs the question - who foots the bill for debt relief?

In the Argosy scenario, I imagine this will come up. Those programs had accreditation. Who bears responsibility for relieving debt? Also, what about prior students? What about students who started there, realized it was a bad deal, cut their losses, then had to start paying?

In my ideal world, Argosy sells off whatever assets they can towards the balance, and then borrowers pay back the rest. When you make a risky gamble, sometimes you get burned.

 

[Pragma]

In my ideal world, Argosy sells off whatever assets they can towards the balance, and then borrowers pay back the rest. When you make a risky gamble, sometimes you get burned.

If they can convince the government that they were misled by Argosy, then all of that debt will be forgiven under the Borrower Defense to Repayment.

 

[WisNeuro]

If they can convince the government that they were misled by Argosy, then all of that debt will be forgiven under the Borrower Defense to Repayment.

I expect that's what will happen, which is sad because it's a known diploma mill and other people will have to foot the bill for someone else's poor decisions.

 

[Pragma]

I expect that's what will happen, which is sad because it's a known diploma mill and other people will have to foot the bill for someone else's poor decisions.

Or more simply, they just use the closed school discharge process. I could see some students trying to do the closed school discharge, then transfer into another program and use the Borrower's Defense to try to keep their Argosy credits but not pay for them.

 

[WisNeuro]

Or more simply, they just use the closed school discharge process. I could see some students trying to do the closed school discharge, then transfer into another program and use the Borrower's Defense to try to keep their Argosy credits but not pay for them.

Reputable programs are already pretty stingy about accepting transfer credits, I can't imagine they'd take too many from Argosy. And, other diploma mills want their money, so I'd be surprised if they took more than a few as well.

 

[StellaB]

If there was a cap on grad borrowing, as there used to be, it would do a lot to limit how much students take out. Sure, private lenders would fill in the gaps at some places, but unless the loans are guaranteed by the taxpayer, I think the appetite for that much risk might be low. That said, in a low interest rate environment, risk appetite is abnormally high, so who knows.

 

[Pragma]

I agree with it too. Very rare, as I haven't agreed with much this administration has done, or tried to do.

@Pragma wasn't trying to derail, felt it was relevant and that starting a new thread would be redundant. You don't have to discuss it.

There will be opponents citing “lack of access to education” or something like that.

That didn’t take long: Trump proposal to cap student loans would deepen inequality in higher ed – ThinkProgress

 

[LadyHalcyon]

Did you see that article about how only something like 10 African American students were admitted to the top high schools in NYC? It's all based off an admissions test and the current student population at some of these schools are ~65% Asian American. Our country is...... interesting.

That didn’t take long: Trump proposal to cap student loans would deepen inequality in higher ed – ThinkProgress

 

[Pragma]

Did you see that article about how only something like 10 African American students were admitted to the top high schools in NYC? It's all based off an admissions test and the current student population at some of these schools are ~65% Asian American. Our country is...... interesting.

No I didn’t see it. One would think NYC wouldn’t rely on just one admissions test.

 

[LadyHalcyon]

https://www-nytimes-com.cdn.ampproj...nyregion/black-students-nyc-high-schools.html

There aren't enough rich people in our country to fill all the colleges. However, there is a discrepancy between SES, race (insert demographic variables) and "ability". They wanted to get rid of the admissions test but many people don't want to. I'm sure there are other criteria, but the kid has to be able to past the test.

No I didn’t see it. One would think NYC wouldn’t rely on just one admissions test.

 

[WisNeuro]

That didn’t take long: Trump proposal to cap student loans would deepen inequality in higher ed – ThinkProgress

People will still take out loans, they'll just be taking out higher interest private loans that are nearly impossible to get out from, even in severe circumstances (e.g., death of primary borrower).

 

[Justanothergrad]

One would almost think that tackling underlying education cost inflation would be worthwhile to address as well...... But that would mean less college administration and we all know we need more provost offices for the mission of whatever, whoknows, and who cares.

 

[ClinicalABA]

Reading this post, it just seems that it would be silly (and irresponsible to the future you) to take out loans thinking that you will ever be able to dismiss any of them. Treat PSLF as a bonus, not as a key piece of your financial planning. Plan on on a salary in the minimum-median range for he areas where you imagine practicing, and take out loans based on this salary. I have personally found that my monthly loan payment seemed reasonable only when it was around 8-10% of my monthly take home pay. It’s still very noticeable and I’d rather be investing it into my retirement, but at ~7% of my take home it seems like it’s a good return on investment.

 

[LadyHalcyon]

Fedloans posted a quarterly report regarding PSLF applications. Here are the numbers, as of September 2018:

Over 40% of ECFs were denied in the past year
424 PSLF applications were granted
32,409 applications denied for not meeting requirements
11,892 applications denied due to missing information

 

[Pragma]

Fedloans posted a quarterly report regarding PSLF applications. Here are the numbers, as of September 2018:

Over 40% of ECFs were denied in the past year
424 PSLF applications were granted
32,409 applications denied for not meeting requirements
11,892 applications denied due to missing information

I feel the need to repost these:

Why The Public Service Loan Forgiveness Headlines Are Misleading

PSLF Snowball Effect: Why the Approval Rate Will Hit Over 50% by 2024

Those numbers aren’t unexpected at this stage.

 

[roryportman]

Just an FYI.. teachers are suing over PSLF and NPR is looking for similar stories.

 

[psychstudent5]

Just an FYI.. teachers are suing over PSLF and NPR is looking for similar stories.

I've been reading online about people who did everything right ---annual recertification, correct loan type, had the right employer, and made all their payments and were STILL denied forgiveness. Even though, they were told year after year that they were on track. It's not enough to say "follow the directions" or "meet the criteria" if the loan servicer is looking for any reason to deny forgiveness. It's hard to believe that 99% of the people who applied for forgiveness simply didn't meet the criteria. That sounds like a systemic problem rather than an individual and "it's the borrowers fault!" problem.

I say this because even thought I will soon be able to qualify for PSLF, I have no intention of taking it and will try to pay off my loans in the next few years (I don't want it hanging over my head for another 10 years and I don't like having an unnecessary bill). I think the government should uphold their end of the deal if the citizen is doing the same.

I also think student loan debt burden should be a factor in the APA accreditation approval process (as I don't think it is...someone correct me if I'm wrong).

 

[Pragma]

Just an FYI.. teachers are suing over PSLF and NPR is looking for similar stories.

“For 10 years, Baker, who was a public school teacher in Tulsa, Okla., checked in with loan servicing companies and was told she was on track.
"I said, 'I'm qualifying for public service loan forgiveness,' and they said, 'OK, great,' " she says.
But it turns out that her $76,000 in student loans didn't get forgiven. Baker was finally told she was in the wrong type of loan. If she'd known that at the beginning, she could have switched loans and ended up qualifying. But she says nobody ever told her.”

No offense intended here, but this sounds absolutely ridiculous. No one taking personal responsibility. Doesn’t sound like she even asked questions to ensure her eligibility.

I keep referring to the articles I posted earlier in the thread - there simply aren’t that many people that qualify initially but that number will continue to grow. Most of the people applying and getting denied simply don’t know or didn’t understand.

Why The Public Service Loan Forgiveness Headlines Are Misleading

The headlines surrounding Public Service Loan Forgiveness are misleading. Understand the nuances and learn why the program is working as intended.

www.forbes.com

Why the PSLF Success Rate Will Hit Over 50% by 2024

Only 864 people out of over 73,000 have been approved for PSLF through mid 2019. Here's why the PSLF success rate will exponentially explode.

www.studentloanplanner.com

 

[LadyHalcyon]

Is your stance the government has not played any intentional role in this? Or is it they possibly have AND people need to take some personal accountability?

“For 10 years, Baker, who was a public school teacher in Tulsa, Okla., checked in with loan servicing companies and was told she was on track.
"I said, 'I'm qualifying for public service loan forgiveness,' and they said, 'OK, great,' " she says.
But it turns out that her $76,000 in student loans didn't get forgiven. Baker was finally told she was in the wrong type of loan. If she'd known that at the beginning, she could have switched loans and ended up qualifying. But she says nobody ever told her.”

No offense intended here, but this sounds absolutely ridiculous. No one taking personal responsibility. Doesn’t sound like she even asked questions to ensure her eligibility.

I keep referring to the articles I posted earlier in the thread - there simply aren’t that many people that qualify initially but that number will continue to grow. Most of the people applying and getting denied simply don’t know or didn’t understand.

Why The Public Service Loan Forgiveness Headlines Are Misleading

The headlines surrounding Public Service Loan Forgiveness are misleading. Understand the nuances and learn why the program is working as intended.

www.forbes.com

Why the PSLF Success Rate Will Hit Over 50% by 2024

Only 864 people out of over 73,000 have been approved for PSLF through mid 2019. Here's why the PSLF success rate will exponentially explode.

www.studentloanplanner.com

 

[roryportman]

It may also be that either she or NPR summarized her experience for sake of article brevity. It is possible that she did ask all the right questions but it's just not written clearly.

Of course, there is also the possibility that she did not understand the loan reqs and did not inquire correctly. It's hard to know, but I can see how loan officers may not understand what the heck they're doing and what qualifications mean, and unfortunately people are led astray. That's the innocent version, and I wouldn't be surprised either if there are some loan officers who intentionally misled people.

Doesn’t sound like she even asked questions to ensure her eligibility.

 

[Pragma]

Is your stance the government has not played any intentional role in this? Or is it they possibly have AND people need to take some personal accountability?

I’m not going to infer intentionality about the government. The fact that the process has some complexity to it and there are several steps that you have to take to qualify reminds me of other government systems. It's simply something to navigate. But as with most issues, it would be silly to be black and white about it.

But the post above wasn't about the government - it was about someone's encounter with a loan servicer. If the quoted statements are literally what they said to their servicer - that they are qualifying for loan forgiveness, then what do you expect a customer service representative from Nelnet or some other servicing company to say? If they have nothing to do with PSLF or the plethora of other loan forgiveness arrangements that are out there, and the customer didn't ask them any questions about it, "OK great" seems like a realistic response to someone calling and making a statement like that.

If there was more to it, like the person asking specific questions about PSLF and then not being referred to Fedloan or the official PSLF website for answers, then there'd be a problem. But it seems to me this is a person who came to the conclusion that they were getting loan forgiveness without actually checking it out. If that is the case, then this is also just another example of shoddy reporting out there, as the writer appears to be making the quotes fit their pre-determined narrative instead of looking for actual truth.

I know more than one person that heard about the program through word-of-mouth and just assumed that since they worked at the VA, that they would get loan forgiveness through PSLF. Never even asked questions or read about it. They were outraged when they realized they weren't making the right types of payments. Anger at the government for not forcing them to actually spend 10 minutes reading about the program. Still expect that the government should be repaying their loans. That's on them, that's not on the government or any loan servicer. It seems like this mentality is pretty pervasive - the expectation that the government is going to cover things for you and the details shouldn't matter. Like this idea to cancel everyone's student loan debt - nevermind those of us that chose to attend inexpensive schools despite opportunities available at expensive places, worked during school to mitigate interest, had roommates, or actually paid off loans. Let's forgive those 30K/year tuitions and fancy one bedroom suites and students who used their loan money to buy cars and go on vacations...

Could they do that for my mortgage? I have an expensive house and I don't want to keep paying every month.

Obviously, the student loan problem is multifactorial and costs have been ballooned by bloated amenities and administrations in higher education. I'm just stating that the students themselves taking out the loans bear responsibility, and if you are expecting loan forgiveness through a program like PSLF, read the documents/requirements! Anything less smacks of entitlement to me.

 

[WisNeuro]

The loan crisis is about 90% the fault of the borrower, and maybe about 10% the system. I agree with Pragma here, the numbers and information are there. If someone chooses to willfully ignore the information, or simply never chooses to understand it, that's on them. I reject the premise that someone entering a masters or doctoral program, cannot make an informed decision about a loan and understand the terms if they read through the conditions. What a ridiculous premise.

 

[Sanman]

There is plenty of fault to go around here. In some cases, personal responsibility and in others intentional deception. The large issue is that mostcpsoole have no idea that a loan servicer on a government loan is a private company. That person can say whatever. That is unnecessarily complicated for many laypeople and loan servicers are not your friend. Welcome to capitalism. This is why we have the most convoluted tax system in the world. Everyone else just pays it on their smartphone.

 

[Pragma]

The large issue is that mostcpsoole have no idea that a loan servicer on a government loan is a private company.

They don't? When you get a statement that says "MOHELA" or "Nelnet" or "Great Lakes" - you think government?

That person can say whatever.

I'm pretty certain there are regulations about what they can and can't say for particular topics. If someone had MOHELA, and someone called saying "hey, my loans are going to be forgiven" - I wouldn't think a customer service representative would need to probe around and try to figure out what the forgiveness program is. It could be forgiveness for being in the military, for working in an underserved area, through NIH, through PSLF - not their problem unless they are actually Fedloan and actually keep track of the PSLF program.

That is unnecessarily complicated for many laypeople and loan servicers are not your friend.

Would you rather the government expand and take over the loan servicers? Because that would be the epitome of "unnecessarily complicated" - I say that with many years of experience under my belt working at government institutions at various levels. Common denominator is how unnecessarily complicated processes are!

 

[WisNeuro]

Would you rather the government expand and take over the loan servicers? Because that would be the epitome of "unnecessarily complicated" - I say that with many years of experience under my belt working at government institutions at various levels. Common denominator is how unnecessarily complicated processes are!

To be fair to the government, they are needlessly complicated, sure. Mostly due to ever changing rules and leadership. But, it wouldn't be any less needlessly complicated in the private sector. It's just the motivation to keep it complicated that differs

 

[StellaB]

It seems to me that blaming the borrowers (even at only "90%") is just about as black-and-white as blaming the government for this mess. There are all kinds of players involved here.

One of the major issues with PSLF, and I believe the crux of this lawsuit, is that the government did absolutely no oversight of the loan servicers they charged with administering the program, and provided almost no guidance at all to borrowers or servicers. It is not like a borrower could get misinformation from a loan servicer and then go online and clear things up easily - especially in the early days of PSLF. Misinformation abounds. It seems like a vague policy was administered with a good measure of ineptitude, resulting in what is effectively a bait-and-switch. The government also anticipated FAR less interest in this program when it was created, and did not budget appropriately for it, so now there is a bit of a perverse incentive to deny borrowers for any reason. "Perverse" in the sense that it goes against the stated purpose of the program.
Say what you want about the program itself (I am not a fan), but once you put something like this in place and make a bunch of promises, you have to hold up your end of the bargain. If they don't, the government is going to have a much harder time convincing people to change their behaviors based on promises in the future. How secure does that federal pension feel?

 

[Pragma]

It seems to me that blaming the borrowers (even at only "90%") is just about as black-and-white as blaming the government for this mess. There are all kinds of players involved here.

One of the major issues with PSLF, and I believe the crux of this lawsuit, is that the government did absolutely no oversight of the loan servicers they charged with administering the program, and provided almost no guidance at all to borrowers or servicers. It is not like a borrower could get misinformation from a loan servicer and then go online and clear things up easily - especially in the early days of PSLF. Misinformation abounds. It seems like a vague policy was administered with a good measure of ineptitude, resulting in what is effectively a bait-and-switch. The government also anticipated FAR less interest in this program when it was created, and did not budget appropriately for it, so now there is a bit of a perverse incentive to deny borrowers for any reason. "Perverse" in the sense that it goes against the stated purpose of the program.
Say what you want about the program itself (I am not a fan), but once you put something like this in place and make a bunch of promises, you have to hold up your end of the bargain. If they don't, the government is going to have a much harder time convincing people to change their behaviors based on promises in the future. How secure does that federal pension feel?

There’s been pretty detailed information up about PSLF for a long time. Maybe not in 2007, but for many years.

The numbers to me suggest they are holding up their end of the bargain, and that we will see increases in forgiveness as actual eligibility increases. The fact that a bunch of people applied when they weren’t eligible does not mean the government is not holding up their end of the bargain.

 

[StellaB]

There’s been pretty detailed information up about PSLF for a long time. Maybe not in 2007, but for many years.

The numbers to me suggest they are holding up their end of the bargain, and that we will see increases in forgiveness as actual eligibility increases. The fact that a bunch of people applied when they weren’t eligible does not mean the government is not holding up their end of the bargain.

If one ignores the numerous reports of people doing everything they were told to do and still being denied, then yes. And it's not just teachers, many lawyers have been caught in this and some have also sued and won (re: which non-profit employers counted). It would be difficult to argue that this program was written clearly, funded adequately or administered appropriately.

The idea that there is an impending wave of approvals will become plausible when it materializes. It hasn't yet, so I don't really see any value to that argument. Until then, there seems to be at least some validity to the complaints of borrowers caught up in this mess.

 

[Pragma]

If one ignores the numerous reports of people doing everything they were told to do and still being denied, then yes. And it's not just teachers, many lawyers have been caught in this and some have also sued and won (re: which non-profit employers counted). It would be difficult to argue that this program was written clearly, funded adequately or administered appropriately.

The idea that there is an impending wave of approvals will become plausible when it materializes. It hasn't yet, so I don't really see any value to that argument. Until then, there seems to be at least some validity to the complaints of borrowers caught up in this mess.

Did you read the articles I posted? Pretty crystal clear. Hardly anyone has actually been eligible yet, so there shouldn’t be numerous applications. The fact that there are tells me that people don’t get it.

 

[StellaB]

Did you read the articles I posted? Pretty crystal clear. Hardly anyone has actually been eligible yet, so there shouldn’t be numerous applications. The fact that there are tells me that people don’t get it.

I read those articles before you posted them. Student debt is definitely a topic I follow closely because I'm concerned about its potential to be an economic destabilizer (not just here, the UK and Canada have similar problems at the moment).

Lucky for us, we will get to see the teacher's union lawsuit play out in the courts and don't have to waste time arguing about it. The ABA's lawsuit was won for the lawyers, as much as I dislike the PSLF program, I hope that the teacher's union also wins. There are plenty of documented reports of individuals calling loan servicers over and over, being told a different thing each time, presumably by an undertrained call center rep, with major consequences for the borrower. It makes no difference to the servicers, the borrowers are a captive customer. When the government created this program that requires students go through these servicers, they needed to perform oversight, because the borrowers were not in a position to just walk away from bad service. That oversight does not appear to have happened. But, like I said, we get to watch how it is litigated either way.

 

[Pragma]

I read those articles before you posted them. Student debt is definitely a topic I follow closely because I'm concerned about its potential to be an economic destabilizer (not just here, the UK and Canada have similar problems at the moment).

Lucky for us, we will get to see the teacher's union lawsuit play out in the courts and don't have to waste time arguing about it. The ABA's lawsuit was won for the lawyers, as much as I dislike the PSLF program, I hope that the teacher's union also wins. There are plenty of documented reports of individuals calling loan servicers over and over, being told a different thing each time, presumably by an undertrained call center rep, with major consequences for the borrower. It makes no difference to the servicers, the borrowers are a captive customer. When the government created this program that requires students go through these servicers, they needed to perform oversight, because the borrowers were not in a position to just walk away from bad service. That oversight does not appear to have happened. But, like I said, we get to watch how it is litigated either way.

If someone can prove that they were openly deceived by a servicer in a lawsuit, then good for them. But that isn’t likely behind most of the applications that got denied - most of them just weren’t eligible (yet) period.

 

[StellaB]

If someone can prove that they were openly deceived by a servicer in a lawsuit, then good for them. But that isn’t likely behind most of the applications that got denied - most of them just weren’t eligible (yet) period.

Both your point and mine can be simultaneously true. Many borrowers weren't eligible yet. But many thought they were because they were misled by the loan servicers. There are some major lawsuits about this currently ongoing or recently decided, including the CFPB v. Navient, State of Massachusetts v. FedLoan. etc. It's a complicated mess, with plenty of blame to go around - including up the chain. And to your point, people are starting to prove that they were deceived by servicers en masse via these lawsuits. I'm sure some people applied without having really looked into the program. But there is a lot of data out there that some nefarious crap was going on too. Income-based repayment plans were less lucrative for servicers, and take much more time to get borrowers set up in (which makes sense, they have to look at federal tax returns, etc.) So in many cases, it appears the loan servicers misled borrowers because they could, it was more profitable, and there were no consequences.

 

[ClinicalABA]

Did you read the articles I posted? Pretty crystal clear. Hardly anyone has actually been eligible yet, so there shouldn’t be numerous applications. The fact that there are tells me that people don’t get it.

Yeah- 28000 applications, and 90ish approvals. That’s a pretty crappy system where, presumably, time needed to be spent to review tens of thousands of non-qualifying applications. While I agree that people should be on top of such important financial things, that ratio (90/28000) is ridiculous and points to problems beyond lack of personal financial responsibility.

 

[Pragma]

Yeah- 28000 applications, and 90ish approvals. That’s a pretty crappy system where, presumably, time needed to be spent to review tens of thousands of non-qualifying applications. While I agree that people should be on top of such important financial things, that ratio (90/28000) is ridiculous and points to problems beyond lack of personal financial responsibility.

Again, why there were 28000 applications when so few were legitimate is a surprise, considering that there was so little eligibility. You can call the ratio ridiculous, but I find the ratio to be meaningless.

Last post of this:

Why the PSLF Success Rate Will Hit Over 50% by 2024

Only 864 people out of over 73,000 have been approved for PSLF through mid 2019. Here's why the PSLF success rate will exponentially explode.

www.studentloanplanner.com

 

[LadyHalcyon]

I think that is a drastic underestimate of the impact of systemic barriers.

The loan crisis is about 90% the fault of the borrower, and maybe about 10% the system. I agree with Pragma here, the numbers and information are there. If someone chooses to willfully ignore the information, or simply never chooses to understand it, that's on them. I reject the premise that someone entering a masters or doctoral program, cannot make an informed decision about a loan and understand the terms if they read through the conditions. What a ridiculous premise.

 

[WisNeuro]

I think that is a drastic underestimate of the impact of systemic barriers.

Fairly accurate I'd say. There are many, cheaper, ways to achieve a good paying profession that don't involve 6 digit loans. There are also good ways to achieve doctoral degrees without taking loans. It's a choice people make. If they choose to take out ridiculous loan amounts for degrees with a poor ROI, they are the ones responsible for creating that systemic barrier, not some anomalous malicious entity.

 

[ClinicalABA]

Again, why there were 28000 applications when so few were legitimate is a surprise, considering that there was so little eligibility. You can call the ratio ridiculous, but I find the ratio to be meaningless.

From a process analysis standpoint, that ratio is ridiculous. It's evidence of an extremely poorly designed process (which, being a federal program, we likely paid for). I taught OBM, and if any student designed a process with such poor processing system feedback (I used the self-managing process design of Dale Brethower et al.) that resulted in basically EVERY PERSON WHO ENTERED THE PROCESS getting kicked out at the receiving system feedback step, they would fail that assignment and get a stern talking to about whether or not they had been paying any attention at during the semester!

There seem to be minimal (in a good sense) objective criteria for eligibility. A process that does not have steps built in along the way to kick out non-eligible people before they submit their applications is highly inefficient. Seriously- a statistically not different from zero amount of applications (out of almost 30 thousand!) get denied because they do not meet objective criteria. There's a problem beyond ignorance of applicants!

That said, the solution, IMO, is not "move the goal posts and make everyone eligible," as some will likely propose.