In recent months, student loan servicers have faced lawsuits related to their handling of Public Service Loan Forgiveness (PSLF). In October 2017, the first cohort of PSLF program participants eligible to receive student loan forgiveness after working in public sector jobs began filing their requests.
At the same time, though, some borrowers partway through the program were dismayed to discover that they might have to start making their 120 payments all over again. They allege that student loan servicers didn’t give them vital information about PSLF, assuring them that they were on track for loan forgiveness when they actually weren’t.
Latest student loan lawsuits over Public Service Loan Forgiveness
Student loan servicers have been under fire in recent years, facing lawsuits from the Consumer Financial Protection Bureau (CFPB) and various state attorneys general. However, the latest round of lawsuits are less about general “unfair and deceptive practices” and more about the PSLF program specifically.
A recent lawsuit, filed against the loan servicer Great Lakes (which was recently bought by Nelnet), alleges that the company provided “false information” about qualifications for Public Service Loan Forgiveness. According to CNN Money, the student loan lawsuit alleges money damages are in order because it will be more expensive — and take longer — to pay off the outstanding student loan debt.
CNN Money also reports that there are PSLF-related lawsuits against Navient. Spokespeople for both companies declined to comment on the litigation, but they insist that they will defend themselves in court.
According to the lawsuits, student loan servicers indicated that borrowers were on track to receive loan forgiveness when, in fact, some of their loans didn’t qualify for the program.
“Unfortunately, it’s probably a lack of training for customer service representatives,” said Jay Fleischman, a student loan lawyer. “It doesn’t let servicers off the hook, but many of the representatives dealing with borrowers probably had no idea that they were offering bad information.”
Not all federal loans qualify for PSLF
At the heart of the issue is the fact that not all federal loans qualify for the PSLF program. Back before the Direct Loan Program, there was the Federal Family Education Loan (FFEL) Program. Those loans were originated by private lenders and insured by the government.
However, the FFEL Program was phased out in favor of the Direct Loan Program. No new FFEL loans were made after June 30, 2010. The loans are still being repaid by some borrowers, though.
This is where things get a little tricky. The College Cost Reduction and Access Act of 2007 created the PSLF program for federal loan borrowers who work in public service and make 120 on-time qualifying payments. However, even though FFEL was a federal program, it featured loans made by private entities. That made FFEL loans ineligible for PSLF.
“The way to qualify FFEL loans for Public Service Loan Forgiveness is to consolidate them using a Direct Loan,” said Fleischman. “But many of my own clients don’t realize this until I tell them, and servicers didn’t do a good job of training their people to answer questions.”
Indeed, the CFPB issued a report in June 2017 highlighting three main complaints against the way servicers handle the PSLF program:
- Incorrect or insufficient information about eligibility, including types of qualifying loans
- Missed qualifying payments due to processing delays
- Problems with the job certification process resulting in miscounted payments
“Servicers may say they are simply the agents for the government and shouldn’t be held accountable for some of these problems,” Fleischman said. “I would argue that, as the government’s agents, they serve the public and they should make better efforts to provide accurate information, especially since they benefit from this arrangement.”
What to do if you are in the PSLF program
If you aren’t sure about the eligibility of your loans, now is the time to double-check. You can use the National Student Loan Data System to check your loans and see which program they belong to. If you have outstanding balances on FFEL loans issued prior to 2010, there’s a good chance you aren’t going to receive forgiveness for them.
Fleischman recommends consolidating those loans through the Direct Loan Program as quickly as possible in order to start the clock on qualified payments.
Consider joining a student loan lawsuit if you feel your servicer has misled you about your PSLF qualifications. CNN Money reports that the lawyer handling the Navient PSLF lawsuits is trying to obtain class-action status. A student loan lawyer can help you decide if it’s worth it to sue a servicer or join an existing lawsuit.
If you do talk to your servicer about your loans and your PSLF eligibility, make sure you go in educated. “You have to ask them what program your loans belong to,” Fleischman said. “And in many cases you need to know the answers to your questions already. The best thing you can do is research and know your stuff.”
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.23% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
Savings example: average savings calculated based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were disclosed. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
Application detail: 5 minutes indicates typical time it takes to complete application with applicant information readily available. It does not include time taken to provide underwriting decision or funding of the loan.
Instant rates mean a delivery of personalized rates for those individuals who provide sufficient information to return a rate. For instant rates a soft credit pull will be conducted, which will not affect your credit score. To proceed with an application, a hard credit pull will be required, which may affect your credit score.
Total savings calculated by aggregating individual average savings across total borrower population from 9/2013 to 12/2017. Individual average savings calculation based on single loans refinanced from 9/2013 to 12/2017 where borrowers’ previous rates were provided. Assumes same loan terms for previous and refinanced loans, and payments made to maturity with no prepayments. Actual savings for individual loans vary based on loan balance, interest rates, and other factors.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
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|2.47% – 6.23%1||Undergrad & Graduate||Visit Earnest|
|2.47% – 8.03%4||Undergrad & Graduate||Visit Lendkey|
|2.95% – 6.37%2||Undergrad & Graduate||Visit Laurel Road|
|2.48% – 6.25%5||Undergrad & Graduate||Visit CommonBond|
|2.72% – 8.32%6||Undergrad & Graduate||Visit Citizens|