Public Service Loan Forgiveness:

Education Needs to Provide Better Information for the Loan Servicer and Borrowers

GAO-18-547: Published: Sep 5, 2018. Publicly Released: Sep 27, 2018.

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What GAO Found

As of April 2018, over a million borrowers had taken steps to pursue Public Loan Service Forgiveness (PSLF) from the Department of Education (Education), but few borrowers have been granted loan forgiveness to date. The PSLF program, established by statute in 2007, forgives borrowers' federal student loans after they make at least 10 years of qualifying payments while working for certain public service employers and meeting other requirements. Over 890,000 borrowers have passed a first step towards potentially qualifying for PSLF by voluntarily having their employment and loans certified as eligible for PSLF as of April 2018, according to data from Education's PSLF loan servicer. While borrowers first became eligible to apply for loan forgiveness in September 2017, few applicants had met all requirements as of April 2018, with 55 borrowers having received loan forgiveness (see figure). Education has used various outreach methods to inform borrowers about PSLF, but the large number of denied borrowers suggests that many are still confused by the program requirements. A recently enacted law requires Education to conduct additional outreach to help borrowers understand how to meet program requirements.

PSLF Certification Requests and Forgiveness Applications, as of April 2018

PSLF Certification Requests and Forgiveness Applications, as of April 2018

Education does not provide key information to the PSLF servicer and borrowers.

  • Guidance and instructions: Education provides piecemeal guidance and instructions to the PSLF servicer it contracts with to process certification requests and loan forgiveness applications. This information is fragmented across the servicing contract, contract updates, and hundreds of emails. As a result, PSLF servicer officials said their staff are sometimes unaware of important policy clarifications. Education officials said they plan to create a comprehensive PSLF servicing manual but have no timeline for doing so.
  • Qualifying employers: Education has not provided the PSLF servicer and borrowers with a definitive source of information for determining which employers qualify a borrower for loan forgiveness, making it difficult for the servicer to determine whether certain employers qualify and for borrowers to make informed employment decisions.
  • Qualifying loan payments: Education does not ensure the PSLF servicer receives consistent information on borrowers' prior loan payments from the eight other federal loan servicers, which could increase the risk of miscounting qualifying payments. Borrowers also lack sufficiently detailed information to easily identify potential payment counting errors that could affect their eligibility for loan forgiveness.

These weaknesses are contrary to federal internal control standards for using and communicating quality information, creating uncertainty for borrowers and raising the risk some may be improperly granted or denied loan forgiveness.

Why GAO Did This Study

Starting in September 2017, the first borrowers became eligible and began applying to have their loans forgiven through the PSLF program. GAO was asked to review the PSLF program.

This report examines the (1) number of borrowers pursuing PSLF and the extent to which Education has conducted outreach to increase borrower awareness of program eligibility requirements, and (2) extent to which Education has provided key information to the PSLF servicer and borrowers. GAO analyzed data from the PSLF servicer on employment and loan certifications and loan forgiveness applications as of April 2018; reviewed Education's guidance and instructions for the PSLF servicer; assessed the information used by Education and the PSLF servicer and communicated to borrowers against federal internal control standards; and interviewed officials from Education and the four largest loan servicers, including the PSLF servicer.

What GAO Recommends

GAO recommends that Education (1) develop a timeline for issuing a comprehensive guidance and instructions document for the PSLF servicer, (2) provide the PSLF servicer and borrowers with additional information about qualifying employers, (3) standardize payment information other loan servicers provide to the PSLF servicer, and (4) ensure borrowers receive sufficiently detailed information to help identify potential payment counting errors. Education agreed with GAO's recommendations.

For more information, contact Melissa Emrey-Arras at (617) 788-0534 or emreyarrasm@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: Education agreed with this recommendation and reported in September 2019 that it was continuing its efforts to improve and streamline guidance for the PSLF servicer. While Education said it is working on developing its comprehensive PSLF servicing manual, it does not yet have a timeline for how it will complete this manual and has indicated that it intends to deliver completed chapters on an iterative basis based on servicing priorities. To implement this recommendation, Education needs to develop a timeline for completing the PSLF servicing manual and demonstrate that it will provide comprehensive guidance and instructions for PSLF servicing.

    Recommendation: The Chief Operating Officer of the Office of Federal Student Aid should develop a timeline for issuing a comprehensive guidance and instructions document for PSLF servicing. This could involve developing a new servicing manual or expanding upon the PSLF servicer's existing processing handbook. (Recommendation 1)

    Agency Affected: Department of Education: Office of Federal Student Aid

  2. Status: Open

    Priority recommendation

    Comments: Education agreed with this recommendation, and in December 2018, the agency released a new online tool to help borrowers better understand the PSLF eligibility requirements. Education has indicated that this tool could eventually be expanded to incorporate additional qualifying employer information. Education has also indicated that implementation of the recommendation is tied to the rollout of a new loan servicing system, which it expects to be fully operational in October 2021. To implement this recommendation, Education needs to demonstrate that it is providing information that will help the PSLF servicer and borrowers determine whether employment with specific employers will qualify borrowers for the program.

    Recommendation: The Chief Operating Officer of the Office of Federal Student Aid should provide additional information to the PSLF servicer and borrowers to enhance their ability to determine which employers qualify for PSLF. This could involve Education developing an authoritative list of qualifying employers or improving the PSLF servicer's existing database, and making this information available to borrowers. (Recommendation 2)

    Agency Affected: Department of Education: Office of Federal Student Aid

  3. Status: Closed - Implemented

    Comments: Education agreed with this recommendation, and in 2020 Education provided documentation of efforts it had implemented to standardize the PSLF loan payment data exchanged between servicers. For example, Education reached agreements with the loan servicers to standardize terminology, address missing and conflicting payment information, and correct other issues identified by the PSLF servicer. As a result of these efforts, the PSLF servicer has indicated that it is now able to process the basic payment history details provided from borrowers' prior loan servicer. This will improve the PSLF servicer's ability to accurately determine qualifying payment counts for borrowers transferring from other servicers.

    Recommendation: The Chief Operating Officer of the Office of Federal Student Aid should standardize the information the PSLF servicer receives from other loan servicers to ensure the PSLF servicer obtains more consistent and accurate payment information for borrowers pursuing PSLF. (Recommendation 3)

    Agency Affected: Department of Education: Office of Federal Student Aid

  4. Status: Open

    Comments: Education agreed with this recommendation, and in June 2020, reported that it is reviewing communications from the PSLF servicer to ensure that borrowers receive sufficiently detailed information regarding payment counts and payment history. Education also indicated that implementation of the recommendation is tied to the rollout of a new loan servicing system, which it expects to be fully operational in October 2021. We will close the recommendation once Education provides documentation of the changes in communications from the PSLF servicer that demonstrate borrowers are receiving sufficiently detailed information regarding payment counts and payment history.

    Recommendation: The Chief Operating Officer of the Office of Federal Student Aid should ensure that borrowers receive sufficiently detailed information from the PSLF servicer to be able to identify any errors in the servicer's counts of qualifying payments, including information on whether or not each payment qualified toward forgiveness. (Recommendation 4)

    Agency Affected: Department of Education: Office of Federal Student Aid

 

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