Student loan forgiveness program under fire for under enrollment, loophole

By Amy R. Connolly

WASHINGTON, Nov. 25 (UPI) -- A federal student-loan forgiveness program aimed at helping those in low-paying public sector jobs has come under fire for underserving its target audience and helping those who may not need it as much, like wealthy physicians.

Jobs With Justice, a workers' rights organization, found 1 percent of eligible borrowers are currently enrolled in the federal Public Service Loan Forgiveness Program, which cancels student loan debt for those working in public service jobs for 10 years. As of June 2015, 335,520 borrowers were enrolled in the program out of the more than 33 million Americans employed in public service, the organization found.


"There has been a systematic failure by the Education Department, as the data we obtained confirms," said Chris Hicks, Debt-Free Future organizer with Jobs With Justice. "Millions of people who stand to gain tens of thousands of dollars in relief are missing out on this benefit, simply because the Education Department and loan servicers have failed to promote the program at a basic level."

To qualify for the program, which opens to loan forgiveness in 2017, borrowers must make 120 on-time, scheduled monthly payments while employed at least 30 weekly hours by a qualified public service organization.


According to the organization's study, 208,745 applicants, or 62 percent, come from government workers. Those who work for non-profits are the second biggest group at 125,075 applicants. While the Department of Education does not keep employment data, many are working as physicians and attorneys at non-profits.

The Government Accountability Office said up to 4 million people may be eligible for the program but only a fraction know about it, adding the Department of Education has done a slipshod job of informing borrowers of eligibility.

"Borrowers who have not been notified about Public Service Loan Forgiveness may not benefit from the program when it becomes available in 2017, potentially forgoing thousands of dollars in loan forgiveness," the GAO said.

A recent Wall Street Journal article found the biggest beneficiaries of the program will be medical-school students, many who owe an average of $180,000, receiving forgiveness under the so-called "doctor's loophole."

"We're subsidizing people who are going to be well-off, better than middle class," Gailen Hite, a retired Columbia University finance professor who has researched the program, told the Journal. "I could understand maybe poor people, disadvantaged people -- somebody who isn't going to be making a quarter of a million dollars a year."


Many will have 80 percent or more of their original balances forgiven under the program, the newspaper reported.

The Education Department said that may not be the case because physicians will make larger payments on their loans as their salaries increase, so many will have their debt paid by the end of the 10-year waiting period before loan forgiveness, Bloomberg reported.

Latest Headlines