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The Feds May Not Forgive Your Student Loan Debt After All

With approvals having been rescinded, it's unclear whether the Education Department will keep its promise to repay the loans of public service workers
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The federal government has suddenly announced it may revoke the eligibility of some workers in a decade-old student debt forgiveness program. The decision comes just as the first class is about to fulfill their commitment, and throws more than half a million public service workers into uncertainty over massive financial obligations they had been promised would be fulfilled.

Serve the Public, Have Your Student Loans Forgiven?

In 2007, as part of a bill to overhaul federal student loans, Congress approved a program that would repay the remaining student loan debts of those who worked in a public service job for 10 years and made regular payments on their federal loans (private loans don't qualify) during that time. Over 500,000 people took advantage of the program, although the Consumer Financial Protection Bureau estimates that as much as 25% of the nation's workforce would likely qualify.

As the program's initial participants near the 10-year mark in October, uncertainty looms. The New York Times recently reported that four lawyers have filed a suit against the Education Department to have their eligibility for the program restored. The plaintiffs contend that they initially received notice that they qualified for the program, only to be told years later they were no longer eligible, even though they were still working the same jobs and had made regular loan payments.

The lawyers work for such organizations as the Vietnam Veterans of America and the American Immigration Lawyers Association, where their salaries are much lower than if they had chosen to work in the private sector. Obviously, there are many decisions they might have made differently had they known that their loans wouldn't be paid off as promised.

Gov Now Says Eligibility Decisions Were "Not Binding"

Meanwhile, the Education Department made a legal filing in response to the suit stating that the approval letters sent by the program's administrator, FedLoan Servicing, are not binding and can be rescinded at any time. Both FedLoan and the Department declined to talk to the Times.

With the suit still to be decided and the first repayments to be made, anything could still happen at this point. But the Education Department's lack of transparency is certainly making some 500,000 people very nervous.

What do you think readers? Are you or someone you know counting on this program to repay your student loans? Let us know in the comments.


Senior Staff Writer

Stephen Slaybaugh is a Brooklyn-based writer with more than 20 years experience. In addition to his work for DealNews, he publishes The Agit Reader music webzine and has written for The Village Voice, Paste, The Big Takeover, and many other publications.
DealNews may be compensated by companies mentioned in this article. Unless marked as a "Sponsored Deal," the opinions expressed here are those of the author and have not been reviewed or endorsed by the companies mentioned. Please note that, although prices sometimes fluctuate or expire unexpectedly, all products and deals mentioned in this feature were available at the lowest total price we could find at the time of publication (unless otherwise specified).
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10 comments
mnrodent
The root cause of the problem is government involvement student lending. If private sector banks would not make these loans that should tell you something. It makes me angry to see the 1 Trillion in delinquent student loans when I worked FULL TIME during college at a menial job while also carrying a full course load at college while working as caretaker at an apartment building with two other roommates in a one bedroom apartment! Pay back your loans or face the consequences! (We should garnish or delay future social security payments for these individuals until these loans are paid!) As a taxpayer I would never have authorized using my tax dollars (or borrowing money from Japan or China) to fund these loans and it make me livid that we send these party-loving slacker snowflakes to college to get degrees for a fill in the blank "studies" degrees that do not prepare them for a real jobs who quite often never graduate and who have no intention (or ability) to ever pay the money back.
Tony Balogna
I'm of the last generation but I tell every young person I meet that unless you have entrepreneurial spirit, born rich, or very smart- the absolute best thing you can get is a govt job. Paying of student loans is one of only many perks (how many people get an old fashioned pension these day?) How about guaranteed pay raises? I rarely hear about a govt worker being laid off. People still talk about the "stock market crash"- that ended up being a bump in the road. Market is higher than it has ever been with no end in site, real estate is soaring again- its a sellers market with bidding wars taking place again. Plus most govt workers are in a union so think of all the job protection you get- a job for life.
Sarah Jones (DealNews)
I don't think this is about people being irresponsible. This program was intended to encourage more people to work in public service jobs. Working in public service for ten years and making all loan payments during that time isn't a small commitment, but some made the decision to do so for the benefit they were promised. They should grandfather in existing borrowers that qualify and not accept new participants if they plan to discontinue the program.
drshuey
This is the sole reason I have been paying minimum payments on my school loans instead of paying them off early. I was told after 10 years I would have the remainder of my loans forgiven, so why would I pay more than the minimum?
piesaresquared
I just love it when reality wins over the liberal agenda. (P.S, reality always wins. Always. Eventually).
Lbrewer42
And so the problem is?????

These people SIGNED a paper stating they WOULD pay back their loans. Then some liberal lawmakers try to teach these people who SIGNED an agreement they WOULD pay it back that their SIGNATURE does not bind them?

A HUGE part of America being made strong again is re-embracing taking responsibility for ones own actions. Liberals with no character have been preaching, 'Blame anything but self for your actions." and weakened us.

Another sad, sad side issue on this is that the colleges took advantage of these people by branching off into useless majors such as - believe it - it's real - use google - garbology (yes - the so-called "scientific" study of garbage to aid in understanding how modern society works by what it throws away!

This farce major was just one of the many "new areas" of study the liberal colleges offered to sucker in more government loan students. Why? Well of course then the college gets more taxpayer in their coffers.
encorez
If you owe money, pay it back. that is how life works.... I gave my kids $50,000 and the rest they will owe. and pay off.
jmackinac
I'm torn here. This is a valuable program for those that earned degrees for professions that were abundant around the time of our recent stock market crashes...in other words, you had the best of intentions and were a victim of our bad economy. But, if you earned your degree within the last 4-8 years and got a degree in some overly-competitive industry where it was likely you wouldn't find a job, you made your bed. Irresponsible people should not be given a free ride by taxpayers. That said, I think the new rules have nothing to do with forgiving your debt. It has to do with the terms or process by which you pay.
boilers
biting tongue
nimer
I'm not impacted, but that's just cruel! It's been known for ages that public service employees make less money than those employed in private sector, but get other perks as a compromise, such has as less hours, more vacation and yes, programs like this.

They should pay up
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