Why Are 99% of the Applications for Debt Discharge under the Public Service Loan Forgiveness Program Being Denied, and Will This Change?

Abstract

During the first 18 months after October 1, 2017 that student loan borrowers were able to apply for tax-free debt forgiveness under the Public Service Loan Forgiveness program a striking 99% of the 76,002 applications that have been fully processed have been denied. The more recently adopted Temporary Expanded Public Service Loan Forgiveness program also has a 97% to 99% application denial rate, depending on how it is calculated. This short article discusses the various factors that may be contributing to such a bizarrely high denial rate, and why the number of applications filed and the proportion of applications filed that are approved are both likely to increase significantly over time, particularly after 2024, and to a greater extent if the Department of Education improves its currently inadequate borrower outreach and loan servicer oversight activities.