What's Wrong with Public Service Loan Forgiveness and How to Fix it

30 Pages Posted:

Date Written: October 31, 2019


In the first two years of the Public Service Loan Forgiveness (PSLF) program almost 100,000 student loan borrowers have applied, and the Department of Education’s contractor has denied roughly 99,000 of those applications. The administration blames Congress for an unduly complex program design, and borrowers for applying without understanding the eligibility rules. Given that PSLF has only four basic eligibility tests, and that applicants are college graduates who can presumably read and count, this narrative seems implausible to explain a 99% denial rate. Evidence from oversight agency reports, state attorney general and class action lawsuits, and thousands of borrower complaints logged by the CFPB tell a different story, a story of agency failure to implement and oversee the program, and of widespread contractor errors and misrepresentations. Until Congress, the Department or an independent agency (such as the CFPB) does a comprehensive audit of the program it is impossible to know the rate of erroneous denials or discharge failures caused by servicer misrepresentations and bad practices. Proper implementation of PSLF will require a combination of contract oversight and design, regulatory, and legislative fixes. In particular, USED must adequately compensate its servicer, relax its unduly strict on-time payment rule, make better use of technology and data sharing with the I.R.S. to confirm eligible public service employment, and offer borrowers effective audit and appeal rights to review servicer errors. Congress should allow all borrower payments under all payment plans on all types of Federal loans to count.

Keywords: Student loans, HIgher Education Finance, Education Department

JEL Classification: H81, I22

Suggested Citation

White, Alan M., What's Wrong with Public Service Loan Forgiveness and How to Fix it (October 31, 2019). Available at SSRN: https://ssrn.com/abstract=

Alan M. White (Contact Author)

CUNY School of Law ( email )

2 Court Square
Long Island City, NY 11101
United States

Register to save articles to
your library


Paper statistics

Abstract Views
PlumX Metrics