Why Are Over 98% of the Applications for Debt Discharge Under the Public Service Loan Forgiveness Program Being Denied?

Forthcoming in 65 Saint Louis University Law Journal ___ (2021)

SMU Dedman School of Law Legal Studies Research Paper No. 480

34 Pages Posted: 19 Aug 2020 Last revised: 3 Jul 2022

See all articles by Gregory S. Crespi

Gregory S. Crespi

Southern Methodist University - Dedman School of Law

Date Written: May 29, 2020

Abstract

On October 1, 2017 student loan borrowers who had taken out federal Direct Loans first became eligible for debt forgiveness under the Public Service Loan Forgiveness program after having completed the required 10 years of qualified public service employment. But as of March 31, 2020 over 98% of the more than 188,000 applications for debt relief that had been filed and fully processed under this program have been denied. The later-adopted Temporary Expanded Public Service Loan Forgiveness program has also had a strikingly high 94%+ denial rate for the over 29,000 applications for debt relief that have been filed and processed as of that date.

This short Article considers the possible reasons for these bizarrely high denial rates and concludes that they are due in large part though not entirely to inadequate borrower outreach and assistance efforts by the Department of Education and its several loan servicers. Over the coming years the proportion of debt relief applications approved under these programs will likely increase, hopefully rather dramatically, This is likely to happen partly because each year a somewhat larger proportion of outstanding federal student loans will be the Direct Loans that are eligible for discharge under these programs rather than ineligible loans taken out under the earlier and now-discontinued Federal Family Education Loan program, and partly because borrowers will surely become more aware over time of both the large benefits and specific requirements of these programs as they are more extensively publicized in the media, and hopefully also partly due to more effective Department of Education efforts under a new Administration to assist eligible borrowers to obtain debt forgiveness.

Suggested Citation

Crespi, Gregory S., Why Are Over 98% of the Applications for Debt Discharge Under the Public Service Loan Forgiveness Program Being Denied? (May 29, 2020). Forthcoming in 65 Saint Louis University Law Journal ___ (2021), SMU Dedman School of Law Legal Studies Research Paper No. 480, Available at SSRN: https://ssrn.com/abstract=3614123

Gregory S. Crespi (Contact Author)

Southern Methodist University - Dedman School of Law ( email )

P.O. Box 750116
Dallas, TX 75275
United States

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