Michelle Singletary: A deadline is looming for Public Service Loan Forgiveness waiver

Marta Maldonado started with $100,000 in student loans for her graduate studies. After 16 years of chipping away at that debt, she still had a staggering $91,000 left to pay

“I figured I would be paying this debt until the end of my life,” the associate professor of ethnic studies at Oregon State University said in an interview. “It’s like a life sentence.”

Maldonado said she tried several times to determine whether she qualified for the federal government’s Public Service Loan Forgiveness, or PSLF, program. The complexity of the program was overwhelming, she said.

PSLF was created in 2007 to encourage public service work for a qualifying employer, such as a government agency or a not-for-profit university. After 120 qualifying monthly payments, the remaining balance of a borrower’s debt is forgiven by the federal government.

The “qualifying” part of the promise has long tripped up borrowers. Through missteps and misdirection from loan servicers, many borrowers discovered that their years of payments hadn’t counted toward loan forgiveness.

Borrowers like Maldonado thought they were well on their way to forgiveness, only to find out they didn’t qualify after all because the type of loan they had wasn’t eligible, or they weren’t in a certain type of income-driven repayment plan, or they weren’t working for a qualifying employer.

Others complained their loan servicers either misled them about their eligibility for PSLF or steered them to forbearance or deferral options that kept them trapped in debt for decades. “The process was just too convoluted,” Maldonado said. “I felt really helpless.”

A 2018 report from the Government Accountability Office found that the Education Department rejected 99% of loan forgiveness requests. Since then, the Education Department has been trying to simplify the process. As part of an effort to address problems with the process, it introduced a time-limited waiver last year that would count previously ineligible payments toward PSLF.

But the reprieve will soon end. Borrowers have until Oct. 31 to apply for a waiver to receive credit for payments that previously did not qualify for PSLF. There has been so much focus on President Biden’s promise to forgive student loans up to $10,000 – and up to $20,000 for Pell Grant recipients – that some borrowers may miss the PSLF deadline, which could erase even more debt.

As of late August, more than $10 billion in debt relief for over 175,000 borrowers has been given through the PSLF program, the Education Department said. You can find out more about the waiver at studentaid.gov/pslf. If you haven’t checked, hurry. You might qualify for the credit if you worked in public service dating back to Oct. 1, 2007.

Maldonado said she had nearly given up applying for the waiver until her union told her about Summer, a company that helps borrowers navigate the byzantine PSLF program. Her union provided free access to Summer’s services.

Summer walked Maldonado through the process of getting into the right loan program (Federal Direct Student Loan) and the right repayment plan (income-driven). Following those moves, she submitted her application to have all those years of payments counted toward forgiveness under the waiver.

It took some time and patience, but the Education Department eventually forgave close to $82,000 in debt for Maldonado. The rest was in private loans, which are not eligible for PSLF. “When I finally got the approval, I just thought, oh my God, things that I had not imagined that I could do, I can, like buying a home,” she said. Many people could use the guidance Maldonado received.

Fidelity Investments, a leader in the not-for-profit workplace retirement savings market, is pushing for just this type of assistance. Fidelity is collaborating with Summer to provide software and expert support to help employees in public sector jobs apply for loan forgiveness. The assistance would be part of the benefits employers offer to their workers.

This makes sense. Work productivity can be impacted by workers stressed about their financial situations, such as a heavy debt load.

“Student loan debt is a major challenge in the country today. We at Fidelity have been working on a number of solutions in this space,” said Debra Frey, head of marketing and analytics for nonprofits at Fidelity.

A potential beneficiary is Kellie Latesky, whose employer, Bronson Methodist Hospital in Kalamazoo, Michigan, is helping her with her student loans as part of Fidelity’s partnership with Summer. She just started the process. She has $88,000 in student loans that she has been paying off for 10 years.

“I am excited at the idea of them helping me get a handle on all of the student loans,” she said. Without the help of Summer, Latesky looked at the process of getting her loans forgiven through PSLF, but she gave up because it was too complicated. “I was unsure of how even to proceed, so I just stopped trying,” she said.

Rather than having borrowers go it alone, Summer provides access to technology and optional expert support to navigate the student loan forgiveness application process and help people check their eligibility. At this time, borrowers can only access Summer through one of its partner organizations.

“There is a big gap between what the program can be and the people who are actually achieving it,” said Bridget Haile, vice president of operations and client experience at Summer. “We’re on a mission to simplify student loan debt and make forgiveness easier to achieve.”

It’s great that the employers offering Summer’s services are helping their workers get the loan forgiveness they are entitled to receive. But it’s a shame this is even necessary.

The Education Department is working on new regulations to improve the PSLF program. Even so, I suspect, given the history of this program, borrowers will still need hand-holding to navigate the application maze to forgiveness.