Public Service Loan Forgiveness: Improving the Temporary Expanded Process Could Help Reduce Borrower Confusion
Released: 2019-09-05T00:00:00

Letter

Background

Education administers federal student aid programs, including the William D. Ford Federal Direct Loan (Direct Loan) program, through the Office of Federal Student Aid. Only Direct Loans are eligible for the TEPSLF and PSLF programs. Under the Direct Loan program, Education issues and oversees federal loans provided to students and contractors service these loans. Education currently contracts with nine loan servicers that each handle the billing and other services for a portion of the over $1 trillion in outstanding student loans provided through the Direct Loan program. These servicers track and manage day-to-day servicing activities. Education contracts with a single loan servicer to implement PSLF and TEPSLF, which includes responding to borrower inquiries, reviewing requests for loan forgiveness, and processing loan forgiveness for qualifying borrowers. Borrowers interested in pursuing loan forgiveness under either PSLF or TEPSLF must have their loans transferred to this loan servicer in order to proceed.

TEPSLF is a temporary expansion of the PSLF program and the eligibility requirements for TEPSLF are largely the same as those of the PSLF program with a few key exceptions. Both provide eligible borrowers with forgiveness on the remaining balance of their Direct Loans after they have met all program requirements. To receive forgiveness for a loan under either PSLF or TEPSLF, borrowers are required to be employed in a public service job for 10 years when making 120 qualifying payments, at the time they apply for forgiveness, and at the time they receive forgiveness for their loans. Specifically, borrowers are generally required to:

Work full-time for at least 10 years at a public service organization, a government organization, agency, or entity at any level (federal, state, local, or Tribal); a nonprofit, tax exempt organization (under section 501(c)(3) of the Internal Revenue Code); or another private nonprofit organization that provides certain public services.

Not be in default on their loans.

Make 120 on-time monthly loan payments for the full amount due on their bill. These monthly payments do not need to be consecutive.

Key differences between PSLF and TEPSLF include:

Qualifying repayment plans. PSLF generally requires borrowers to repay their loans through one of the eligible income-driven repayment plans or the Standard repayment plan. TEPSLF allows borrowers to qualify for loan forgiveness through several additional types of repayment plans that do not qualify for PSLF, including the Graduated repayment plan, Extended repayment plan, Consolidated Standard repayment plan, and Consolidated Graduated repayment plan.

Funding. TEPSLF loan forgiveness is temporarily available to borrowers on a first-come, first-served basis until the $700 million is expended. The PSLF program will continue unless repealed by Congress.

Specific payment requirements. For TEPSLF, the following two payments generally must be at least as much as the borrower would have paid under an income-driven repayment plan: (1) the payment made immediately prior to applying for TEPSLF, and (2) the payment made 12 months prior to applying for TEPSLF.

In the context of high denial rates in the PSLF program and evidence that some borrowers were being misinformed by loan servicers about which repayment plans would qualify for PSLF, Congress appropriated $4.6 million for Education to conduct outreach on PSLF and TEPSLF. The legislation called for this outreach to be targeted to, among others, borrowers who would qualify for PSLF loan forgiveness except that they have made some or all of their payments through plans that do not qualify.

Education’s Temporary Expanded Loan Forgiveness Process Is Not Clear to Borrowers

Congress directed Education to implement a simple method for borrowers to apply for TEPSLF within 60 days after the legislation funding the program was enacted. In response, Education established a process in which borrowers send an email to the TEPSLF loan servicer with their name and date of birth to initiate their TEPSLF review and establish their place in line for TEPSLF funds. In addition to sending an email to initiate a TEPSLF request, Education requires that a borrower has submitted a PSLF application before they can be considered for TEPSLF (see fig. 1). While a PLSF application is not explicitly required by statute for a borrower to be considered for TEPSLF loan forgiveness, Education officials said that the department added this step to the process because the PSLF application form captures information the TEPSLF loan servicer needs to determine a borrower’s eligibility for TEPSLF. Education officials said that they added this step in order to roll out the TEPSLF program within the required 60 days.

Education’s TEPSLF website states that borrowers interested in this temporary expanded loan forgiveness option must submit a PSLF application in order to be considered for TEPSLF. Even with this information, our review of TEPSLF loan servicer data found that 71 percent of denied TEPSLF requests were denied because the borrower had not submitted a PSLF application. Education officials said that they believed that many borrowers send a TEPSLF request without submitting a PSLF application because TEPSLF funding is temporary and borrowers know that sending the email request will hold their place in line for the limited funds. However, borrowers who have not submitted the PSLF application are sent a denial letter from the TEPSLF loan servicer. According to Education officials, these borrowers would lose their place in line and have to reapply if they want to be reconsidered for TEPSLF.

Officials from Education, the TEPSLF loan servicer, and representatives from selected organizations representing student borrowers all said that the requirement to submit a PSLF application to be eligible for TEPSLF loan forgiveness can confuse borrowers. For example, Education officials acknowledged that the majority of TEPSLF requests come from borrowers who have not first submitted a PSLF application, and officials from the TEPSLF loan servicer said that borrowers who called were frequently confused when they received a TEPSLF denial based on the fact that they had not first submitted the PSLF application. In addition, representatives from the three student borrower groups we interviewed said that having to apply for PSLF before requesting TEPSLF often confuses borrowers and, in the opinion of officials from two of the three groups, leads directly to large numbers of TEPSLF denials. We also found some examples of borrower confusion about the PSLF application requirement in our review of borrower complaints. In three TEPSLF borrower complaints filed with Education that we reviewed, the borrowers expressed confusion and frustration about why they were being asked to submit an application for a program—PSLF—they knew they did not qualify for in order to receive TEPSLF loan forgiveness.

Education’s policy of requiring all borrowers requesting TEPSLF to first submit a PSLF application has created a confusing process for borrowers. Education officials said that integrating the TEPSLF request into the PSLF application—for example, by including a checkbox that borrowers could use to request a TEPSLF review if the loan servicer finds they are ineligible for PSLF—would eliminate the need for borrowers to take multiple steps, reduce the number of borrowers who are denied, and improve service to borrowers. Education officials estimated that integrating the TEPSLF request into the existing PSLF process would require roughly a year in order to revise the PSLF application form, borrower communications, and program procedures, and to work with the loan servicer to implement new contractual requirements. Education officials told us that they will be implementing a new online portal in fall 2019 to provide better overall service to borrowers. They also stated that the new portal could incorporate an online integrated PSLF and TEPSLF application if they had sufficient resources and time, but that there were currently no specific plans to do so.

While Education rolled out the process for requesting TEPSLF loan forgiveness in 2 months, it has not created a borrower-friendly TEPSLF process. This does not align with Education’s strategic plan objective to improve the quality of service to customers across the student aid life cycle. Further, Congress created the temporary expansion to the PSLF program to help certain borrowers who faced barriers obtaining PSLF loan forgiveness and required Education to develop a simple method for borrowers to apply for TEPSLF. While initiating a TEPSLF request through an email is straightforward, requiring borrowers to have submitted a PSLF application to successfully pursue TEPSLF loan forgiveness is confusing and inefficient for borrowers because borrowers must take multiple steps and complete an application for a program they do not qualify for. If Education were to allow borrowers to request TEPSLF loan forgiveness through an integrated application form, it would improve service to borrowers, reduce borrower confusion about how to obtain loan forgiveness, and better align with its strategic plan objective to improve service to borrowers. Further, although TEPSLF is a temporary opportunity, it could be years before the $700 million appropriation is exhausted, and it is therefore worthwhile for Education to invest resources in improving the process now.

Ninety-nine Percent of Borrowers’ TEPSLF Requests Have Been Denied and Certain Denial Letters Do Not Include Important Information

Education Has Approved 1 Percent of TEPSLF Loan Forgiveness Requests and Spent 4 Percent of TEPSLF Loan Forgiveness Funds in a Year

From May 2018 through May 2019, about 40,000 borrowers submitted TEPSLF requests for loan forgiveness and Education has approved or denied about 54,000 separate TEPSLF requests. Education has approved 1 percent (661) and denied 99 percent (53,523) of these requests, according to the most recent data from the TEPSLF loan servicer (see fig. 2).

Of the 53,523 denied TEPSLF requests, about 38,000 were ineligible for consideration and were therefore denied because the borrower had not submitted a PSLF application, according to data from the TEPSLF loan servicer. Of the remaining denied requests, about 15,000 were denied because they did not meet other program requirements (see fig. 3).

As we previously noted, under the current TEPSLF review process, the loan servicer first checks to see if the borrower requesting TEPSLF has submitted a PSLF application. If the borrower has not done so, the loan servicer does not conduct any further review of the borrower’s request and sends the borrower a denial letter informing them they have to submit the PSLF application before the borrower can be considered for TEPSLF. Without the loan servicer conducting any further review of a borrower’s request, it is impossible to know how many of the roughly 38,000 requests that were denied because the borrower had not yet submitted a PSLF application would have otherwise met all other program requirements and been approved for TEPSLF loan forgiveness. The large number of TEPSLF requests denied for not submitting a PSLF application provides further evidence that many borrowers may be confused about the process for obtaining TEPSLF loan forgiveness. Further, more than 5,000 (about 10 percent) of the TEPSLF requests were denied because the borrower had not been repaying their loans for at least 10 years, which indicates that they had not yet made 120 qualifying payments—a straightforward program requirement.

Since TEPSLF became available in May 2018, Education has approved TEPSLF loan forgiveness totaling about 4 percent (approximately $26.9 million) of the $700 million appropriated for TEPSLF loan forgiveness, according to the most recent data available from the TEPSLF loan servicer at the time of our review (see fig. 4). Of the 656 borrowers approved for TEPSLF loan forgiveness, the borrowers received an average of about $41,000 in loan forgiveness, with loan forgiveness amounts ranging from about $190 to about $227,000.

Education Does Not Fully Inform Borrowers about Available Options to Contest Denial Decisions

Education does not provide complete information to borrowers about options they have to contest a denied TEPSLF request. Specifically, the letter the TEPSLF loan servicer sends to the borrower communicating a decision to deny the TEPSLF request includes the reason for the denial and the TEPSLF loan servicer’s customer service number for borrowers to call with questions. An FSA official told us that while there is no formal process for borrowers who are dissatisfied with their TEPSLF or PSLF determinations to contest them, borrowers do have additional options for addressing concerns, such as an additional review by the TEPSLF servicer, or a complaint to the FSA Feedback System or Ombudsmen (see fig. 5).

According to Education officials, when a borrower is denied loan forgiveness, they can call the TEPSLF loan servicer’s customer service number with questions about the denial. TEPSLF servicer officials said that if the customer service representative is unable to resolve the borrower’s questions, the representative can elect to elevate the borrower’s concern internally within the TEPSLF loan servicer, which may result in a second review by loan servicer management. Education and TEPSLF loan servicer officials said that borrowers who are not able to resolve their issues with the loan servicer can bring their issues directly to Education. Specifically, if a borrower is dissatisfied with their TEPSLF decision, they can submit their concern through the online FSA Feedback Tool. Borrowers can also contest the decision with the FSA Ombudsman Group.

Education officials told us it does not provide information about these options in its denial letters or on its TEPSLF website, noting that borrowers could find this information at the bottom of FSA’s main website. Education officials also stressed the importance of borrowers resolving their concerns first with their loan servicer directly before pursuing other avenues, and said that this is part of the reason why they do not include this information in letters sent to borrowers. All TEPSLF denial letters include a statement at the bottom of the letter indicating that if borrowers had questions about the information in their denial letter, they should call the general customer service number at the TEPSLF loan servicer for assistance. The letters did not explain how the servicer could potentially do a second review or subsequently refer the matter to Education. Information about the potential for a second review at the loan servicer and the option to raise an issue with Education directly would help borrowers who are unable to resolve their concerns by calling the general customer service number at the loan servicer.

Additional information on options for contesting decisions is not necessary for all TEPSLF borrowers who are denied. For example, it may not be appropriate to include this information in denial letters sent to borrowers who do not meet basic program requirements—for example, those who have no federal Direct Loans. However, borrowers who are denied for reasons that are more prone to error, such as having fewer than 120 qualifying payments, are not made aware of all the available options so they can make informed decisions about how to best resolve their concerns. We previously reported that Education does not ensure that the loan servicer responsible for PSLF and TEPSLF is receiving consistent loan payment history information from other loan servicers, increasing the risk of inaccurate qualifying payment counts. This also raises the risk of inappropriate denials for TEPSLF. Our review of TEPSLF complaints made to Education from borrowers found eight examples of borrowers contesting the loan servicer’s determination of the number of qualifying payments. In six of these instances, the TEPSLF servicer determined that the borrowers were correct and had met requirements for loan forgiveness. Given the risk of denial errors, additional information about options for borrowers who are dissatisfied with their TEPSLF denial determination is especially important.

While there is information about options for contesting decisions at the bottom of FSA’s main website, it is not incorporated into the TEPSLF website and borrowers may not know where to find this information. Federal internal control standards for external communication with stakeholders call for communication of quality information with external parties to achieve program objectives. Providing this information in relevant denial letters and Education websites will increase the likelihood that borrowers with valid concerns will have their TEPSLF requests appropriately resolved.

Education Contacts Certain Borrowers Directly about TEPSLF, but Its General TEPSLF Outreach Activities Are Limited

Education Conducts Direct Outreach to Certain Individual Borrowers

Education and the TEPSLF loan servicer conduct direct outreach to certain borrowers about TEPSLF. For example, when TEPSLF was first rolled out, Education sent a notice to over 1,000 borrowers who had been denied PSLF due to a lack of 120 qualifying payments, but who had been in repayment for at least 10 years. Education officials told us that they had identified this group of borrowers as the most likely to be eligible for TEPSLF. This notice informed borrowers of the new TEPSLF loan forgiveness opportunity and told them how to apply for it. Education officials told us that they continue to review the PSLF denial list on a weekly basis and send notices to those whom they have determined to be the most likely to qualify for TEPSLF loan forgiveness. In addition, borrowers who have previously expressed interest in TEPSLF by sending an email to request TEPSLF loan forgiveness will be sent a TEPSLF outreach letter by the TEPSLF loan servicer under certain conditions: after submitting a new employment certification form, or after submitting a new PSLF application that is subsequently denied.

In these two circumstances, the TEPSLF loan servicer sends the borrower a letter suggesting that they may now be eligible for TEPSLF loan forgiveness and would need to re-request such loan forgiveness.

Education’s General TEPSLF Online Outreach Is Limited

Education officials told us that the agency has focused on a broad, general outreach strategy; however, we found that its online information is limited because TEPSLF information is not included in several key online sources. Education and TEPSLF loan servicer officials told us that they primarily direct borrowers to online sources to inform them about TEPSLF requirements. For example, Education has created a TEPSLF-specific website and the TEPSLF loan servicer’s website references the TEPSLF opportunity and links to Education’s TEPSLF website if borrowers would like more information.

However, we found that while all nine of the loan servicers’ websites contain some information on the PSLF program, none of them (other than the TEPSLF loan servicer) included TEPSLF information on their websites or provided a link to Education’s TEPSLF website. While Education officials told us that only the TEPSLF servicer is required to have TEPSLF information on its website, other loan servicers may also serve borrowers who are potentially eligible but may be unaware of TEPSLF. In addition, borrowers with other loan servicers who are interested in TEPSLF may not be aware that they have to transfer to the TEPSLF loan servicer to obtain loan forgiveness.

Further, according to agency officials, Education’s PSLF Online Help Tool also does not include any TEPSLF information, and Education has not created a similar tool for TEPSLF. Education officials told us that the PSLF Online Help Tool, which assists borrowers with determining whether their loans and employment qualify and which PSLF forms they need to submit, is one of the primary PSLF outreach mechanisms to inform borrowers about PSLF eligibility. According to Education data, since the rollout of the online tool in December 2018 through the beginning of March 2019, about 340,000 users have used the online tool, and about 100,000 have logged on and have collectively generated about 40,000 PSLF-related forms, such as PSLF application forms. However, according to Education officials, the online tool does not include any information on TEPSLF. Education officials stated that the first phase of the Online Help Tool was focused on informing borrowers about eligibility requirements for PSLF and that as the department makes enhancements to phase two of the Online Help Tool, it could consider adding TEPSLF information and functionality. Both FSA and TEPSLF loan servicer officials stated that having information on TEPSLF integrated into the PSLF Online Help Tool would be beneficial for borrowers and would reduce confusion about TEPSLF. Federal internal control standards state that management should externally communicate the necessary quality information to achieve the entity’s objectives. Including TEPSLF information in the PSLF Online Help Tool and noting it on all loan servicer websites could increase borrower awareness of TEPSLF and the likelihood that borrowers are able to take advantage of this opportunity.

Conclusions

The loan forgiveness opportunity through TEPSLF is an expansion of the PSLF program and helps borrowers who hoped to qualify for PSLF but who did not realize they were in an ineligible loan repayment plan. Instead of integrating the expanded loan forgiveness opportunity into the existing PSLF process, Education required borrowers to have submitted a separate PSLF application before the loan servicer will consider a borrower’s TEPSLF request. The large number of requests denied because borrowers had not submitted a PSLF application suggests that borrowers are confused about this requirement. In some cases, these borrowers may have been working in public service jobs for years believing they were on track for loan forgiveness, only to find out later that they did not qualify. While the loan forgiveness opportunity through TEPSLF is only available until the $700 million in funding has been spent, a relatively small amount of total funding has been spent so far. It is possible that the program could continue for years, supporting the case for investing in improvements to the process now. Integrating the process for obtaining loan forgiveness through TEPSLF into the PSLF application would be easier for borrowers and help Education meet its goal to improve customer service.

Information provided in TEPSLF denial letters and on the TEPSLF website does not explain what options are available to borrowers if they want to contest the loan servicer’s determination. While additional information on this topic is not necessary for borrowers who do not meet basic program requirements—for example, those who have no qualifying federal loans—this information would help certain borrowers whose TEPSLF requests may have been denied. By including this additional information on the TEPSLF website and in denial letters to these borrowers, the borrowers can then pursue additional options to contest the denial and help Education avoid denial errors.

Finally, Congress provided funding and tasked Education with conducting outreach to borrowers to help increase overall borrower awareness of the public service loan forgiveness programs. While Education has engaged in some outreach activities, Education is missing opportunities to reach out to borrowers potentially eligible for TEPSLF—specifically, by not requiring all loan servicers’ websites to include information about TEPSLF and not including TEPSLF information in the PSLF Online Help Tool. TEPSLF was created to provide relief to a group of borrowers who were ineligible because they were repaying their loans on repayment plans that were not eligible for the original PSLF program. Without improved TEPSLF outreach in these two areas, however, many of these borrowers who were initially unable to qualify for the PSLF program may be unaware of the TEPSLF opportunity that was designed to help them.

Recommendations for Executive Action

We are making the following four recommendations to Education’s Office of Federal Student Aid:

The Chief Operating Officer of the Office of Federal Student Aid should integrate the TEPSLF request into the PSLF application, for example, by including a checkbox on the PSLF application, to provide borrowers a more seamless way to request TEPSLF consideration. (Recommendation 1)

The Chief Operating Officer of the Office of Federal Student Aid should provide certain borrowers, for example, those who are denied TEPSLF for not having 120 qualifying payments, with more information about options available to contest TEPSLF decisions on the TEPSLF website and in their denial letters. (Recommendation 2)

The Chief Operating Officer of the Office of Federal Student Aid should require all loan servicers to provide TEPSLF information on their websites. (Recommendation 3)

The Chief Operating Officer of the Office of Federal Student Aid should include TEPSLF information in its PSLF Online Help Tool. (Recommendation 4)

Agency Comments and Our Evaluation

We provided a draft of this report to Education for its review and comment. In its comments, reproduced in appendix I, Education concurred with each of our recommendations and identified steps it plans to take to implement them. To make the TEPSLF loan forgiveness process easier for borrowers, Education stated that it will integrate the TEPSLF request into the PSLF application as part of the improvements planned for the PSLF application under its new online interface for student borrowers. Regarding our recommendation to provide certain borrowers with more information about options available to contest TEPSLF decisions, Education stated that it will add information for borrowers on the procedures for contesting TEPSLF decisions to FSA’s specific TEPSLF website and in relevant TEPSLF denial letters. To improve outreach and help increase overall borrower awareness of TEPSLF, Education stated it will require all loan servicers to provide TEPSLF information on their websites within 120 days. In addition, Education stated that it will also include TEPSLF information in the PSLF Help Tool. We also provided relevant report sections to the TEPSLF loan servicer for technical comments. The TEPSLF servicer provided technical comments, which we incorporated as appropriate.

We are sending copies of this report to relevant congressional committees, the Secretary of Education, and other interested parties. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff have any questions about this report, please contact me at (617) 788-0534 or emreyarrasm@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made key contributions to this report are listed in appendix II.

Appendix I: Comments from the Department of Education

Appendix II: GAO Contact and Staff Acknowledgments

GAO Contact

Staff Acknowledgments

In addition to the contact named above, Michelle L. St. Pierre (Assistant Director), Nora Boretti (Analyst-In-Charge), and Aaron Karty made significant contributions to this report. Also contributing to this report were James E. Bennett, Deborah Bland, Alicia P. Cackley, Marcia L. Carlsen, Linda A. Collins, William W. Colvin, Alex Galuten, Sheila R. McCoy, Jean L. McSween, Jessica S. Orr, Debra Prescott, and Ashanta Williams.

Related GAO Products

Public Service Loan Forgiveness: Education Needs to Provide Better Information for the Loan Servicer and Borrowers. GAO-18-547. Washington, D.C.: Sept. 5, 2018.

Federal Student Loans: Further Actions Needed to Implement Recommendations on Oversight of Loan Servicers. GAO-18-587R. Washington, D.C.: July 27, 2018.

Federal Student Loans: Education Could Improve Direct Loan Program Customer Service and Oversight. GAO-16-523. Washington, D.C.: May 16, 2016.

Federal Student Loans: Key Weaknesses Limit Education’s Management of Contractors. GAO-16-196T. Washington, D.C.: Nov. 18, 2015.

Federal Student Loans: Education Could Do More to Help Ensure Borrowers Are Aware of Repayment and Forgiveness Options. GAO-15-663. Washington, D.C.: Aug. 25, 2015.