Student loan forgiveness program for military borrowers slowly improves

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Jodie Parks works full time as an occupational therapist at a Michigan state psychiatric hospital. But since October, she has had a second job: spending four hours a week, she estimates, making calls and chasing down paperwork to prove that she previously served in the military.

She needs that proof to have her student loans forgiven under the federal government’s Public Service Loan Forgiveness program, created by a 2007 law that pledged to erase students’ debt if they took lower-paying but critical jobs with nonprofits and the government.

It’s a promise that, for most borrowers, has yet to pay off. Less than 2 percent of applicants were approved between 2017, when the first borrowers became eligible, and the onset of the coronavirus pandemic. And among the huge number of applications denied or lost in the bureaucracy were many from Americans who perform perhaps the ultimate public service: joining the armed forces.

“I’m another veteran who’s been told that there’s a service for veterans, and then when you try to get through the red tape, it’s too hard,” said Parks, who was in the Air Force from 2009 to 2015 and then earned a degree in occupational therapy. “So you just kind of give up.”

Ninety two percent of military borrowers who applied for loan forgiveness before the pandemic were denied by the Department of Education, according to the US Government Accountability Office, because of confusing and narrow rules about eligible loan types and repayment plans that made it difficult for them to qualify.

“The law made a promise to people that if they went into public service jobs, they would have forgiven their loans. And a lot of people went to school on that basis,” said Christopher Madaio, vice president for legal affairs at Veterans Education Success, which advocates for military members.

US could have forgiven thousands of student loans but never told borrowers

In October, the Biden administration temporarily loosened the program’s rules for one year to give more borrowers the chance to qualify. Waived are many of the strict guidelines that stymied applicants. That has helped more members of the military with student debt: About 1,500 have had their loans forgiven under the waiver since October, a spokesperson for the US Department of Education said in an email.

But there are almost 177,000 active-duty service members whose federal loans are or could be eligible for forgiveness, according to the GAO. And that larger number doesn’t include the thousands, like Parks, who are no longer on active duty. She and other veterans said they’ve spent months trapped in a bureaucratic maze that may make it harder for them than for nonmilitary borrowers to get forgiveness.

Thousands of dollars are in play. About helped the active-duty service members who have federal student loans have balances of more than $13,000, according to the GAO.

A lot is at stake for the armed forces, too. In an all-volunteer system, it has a tough time finding people to fill mission-critical jobs, including doctors and information technology specialists, for whom the forgiveness program could be an effective recruitment tool, the GAO noted. In a survey of military lawyers, 94 percent said they would be more likely to quit the service if the program were eliminated.

For Parks and other veterans, the biggest hurdle in getting loan forgiveness has been proving to the Department of Education that they served — an odd problem, since a fellow federal agency, the Department of Defense, has that information.

Parks, 39, has about $48,000 in student loans, and when she heard about the temporary waiver in October, she got to work assembling her forgiveness application. A key piece of it is a form that applicants must get signed by current or former employers — government agencies or nonprofits — certifying the dates that forgiveness applicants worked there.

For Parks, getting that employment certification form signed by the state of Michigan, her current employer, couldn’t have been easier.

She thought it would be the same with the Air Force. Instead, she spent weeks making calls to find out who in the bureaucracy might sign. Finally given the number of a person she was told could do it, she tried him every day for a month and never heard back.

Biden administration gives more borrowers chance of debt cancellation

Next, she contacted Veterans Affairs, getting rerouted repeatedly until she reached an official who leveled with her: It would be nearly impossible to get a signature out of VA because it didn’t have anyone designated to provide one. He suggested she go to a military base and ask someone there to sign the form, or contact a commander she knew. But most of her commanders had retired in the six years since she had served.

All this would have been avoided had her loan servicer, a Department of Education contractor called FedLoan Servicing, accepted as proof a standard official document veterans get when they leave the military: their certificate of release or discharge, better known as DD Form 214. It shows veterans’ dates of service and is used as proof for benefits including VA home loans.

But, Parks said, FedLoan told her it wasn’t enough.

Other veterans and service members have experienced similar frustrations.

To qualify for Public Service Loan Forgiveness, a person has to not only work full time at a public agency or nonprofit but also make 120 payments on their loans — typically over 10 years. Navy veteran Stacy Hunter, 46, submitted her DD 214 with her forgiveness application in October but was told in a letter from FedLoan and the Department of Education that her seven years of service, during which her loan payments were deferred, didn’t count toward from 120 payments.

That’s despite the department’s announcement in October that months spent on active duty count toward PSLF even if the service member’s loan payments were in deferment.

Mike Smiley, 42, also spent many hours getting military sign-off for, and seeking answers about, the loan forgiveness he believed he had earned. He served 14 years in the Navy as a doctor. Today he’s a pediatric pulmonologist in St. Louis. With $50,000 owed in student loans and four children, he would be hugely helped by getting out of under that debt, he said.

FedLoan wouldn’t accept his DD 214 and even rejected a letter from the Navy’s personnel command verifying his service, Smiley said. But former Navy co-workers connected him with the human resources department at his old command, and the department signed his employment form. He submitted his forgiveness application in December.

After hearing nothing for several weeks, Smiley submitted a complaint to the Department of Education and later went to the department’s ombudsman. He started calling FedLoan every two to three weeks, spending at least an hour on hold over his lunch hour. On one call in early March, he found out that his application was stuck because he had saved it as a PDF file.

Finally, on March 22, his loan forgiveness was approved.

“I really wish they would come up with a process to take care of people, not just myself, but other people who are in my shoes who maybe aren’t as persistent,” he said.

What to know about the latest student loan forgiveness waiver

After the waiver announcement in October, the number of forgiveness applications spiked by 40 percent, said a Department of Education spokesperson who spoke on the condition of anonymity because she wasn’t authorized to speak on behalf of the department on this topic. “The loan servicer system had not quite been reconfigured to be able to send the kind of automated communications that align with the terms of the waiver and the benefits that were being offered. … This is not a perfect process,” she said.

If a forgiveness application is otherwise in order, the spokesperson said, the DD 214 “generally suffices” to prove military service. Asked in what cases it wouldn’t be enough, she said she didn’t know. As for FedLoan, spokesperson Keith New said by email that DD 214 forms are acceptable if submitted with other information and “reviewed on a case-by-case basis.”

Madaio of Veterans Education Success gives the Biden administration credit for using its authority to temporarily waive the program’s narrow rules, a step for which military borrower advocates had been calling. “The administration is trying as hard as it can,” Madaio said.

The Department of Education is now working with the Department of Defense to automatically match data across the two agencies, said a department spokesperson — which could end borrowers’ struggle to get signatures. And it’s collaborating with advocates on permanent regulations that could help more borrowers qualify after the waiver expires in October.

For her part, Parks feels lucky that her work schedule makes it possible to keep on top of her forgiveness application.

“If I wasn’t at a job with an afternoon shift, there’s no way that I would have gotten any of this done,” she said.

This article about military veterans and student loans was produced by the Hechinger Report, a nonprofit, independent news organization focused on inequality and innovation in education. Sign up for our higher education newsletter.

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