When Did Public Service Loan Forgiveness Begin

Seth Frotman, onetime student loan ombudsman at the Consumer Financial Protection Agency, poses at NPR headquarters in September. Frotman and his team reviewed thousands of complaints near the questionable practices of pupil loan companies. Cameron Pollack/NPR hibernate caption

toggle explanation

Cameron Pollack/NPR

Seth Frotman, former student loan ombudsman at the Consumer Fiscal Protection Agency, poses at NPR headquarters in September. Frotman and his squad reviewed thousands of complaints about the questionable practices of student loan companies.

Cameron Pollack/NPR

Update: Many student borrowers have responded to this story by sharing stories of their struggles with PSLF. We've curated many of them here .

On the morning of Monday, Aug. 27, Seth Frotman told his two young daughters that he would probable exist home early that twenty-four hour period and could take them to the playground. They cheered.

He did not tell them why their dad, who often worked long hours as the pupil loan watchdog at the federal Consumer Financial Protection Bureau, would be free for an afternoon play date.

Frotman assumed that after walking into his office and, at precisely 9:30 a.m., hitting "send" on an incendiary resignation letter to lawmakers accusing the Trump assistants of betraying student borrowers, he would promptly be walked out with his things, and his career, in a paper-thin box.

"Unfortunately, under your leadership," Frotman wrote to his boss, Mick Mulvaney, "the Agency has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the nearly powerful fiscal companies in America."

Frotman arrived at this conclusion, in part, after he and his team reviewed thousands of borrower complaints the previous summer. Ane program kept coming up, hurting and infuriating the very people it was meant to help: the U.South. government'south effort to reward student borrowers for public service — for existence nurses, teachers and beginning responders.

This is the story of Seth Frotman, the mangling of the program known every bit Public Service Loan Forgiveness, and what it says virtually America'due south student loan manufacture.

The middlemen

Congress created Public Service Loan Forgiveness (PSLF) in 2007, in the waning days of the Bush assistants. The pitch to borrowers was elementary:

Spend x years teaching, nursing, policing or otherwise working for a qualified nonprofit while too making 120 monthly payments confronting your educatee loans, and the government would forgive whatsoever's left. Every bit a cheers.

Merely recent data from the Department of Teaching evidence that 99 pct of applications for loan forgiveness take been denied.

The pitch may have been simple, only the execution was annihilation just.

Today, the U.S. Department of Education is, essentially, a trillion-dollar bank, serving more than twoscore meg student borrowers. While the government writes these student loans, it just cannot run the call centers or handle the paperwork for so many borrowers. It needs assist. Then it pays companies — the department has contracts with ix of them — to handle customer service. These servicers, as they're known, are glorified record-keepers and debt collectors. But they're besides powerful gatekeepers.

And these servicers, Frotman found, with a large aid from the Education Department, were wreaking havoc with the Public Service Loan Forgiveness plan.

Staying on track while giving back

In Greek mythology, Cassandra is the daughter of Male monarch Priam of Troy and is both blessed and cursed.

Her blessing: She tin can encounter into the futurity and knows, beyond a doubt, that her urban center'due south undoing awaits inside a wooden horse.

Her curse: No one believes her.

Seth Frotman is the Cassandra of the student loan industry.

Frotman served three years as the CFPB'south pupil loan ombudsman and head of its Office for Students and Young Consumers. A fierce watchdog for student borrowers, Frotman and his squad reviewed thousands of complaints most the questionable practices of student loan companies.

Since 2011, the CFPB has handled more than 60,000 educatee loan complaints and, through its investigations and enforcement deportment, returned more than $750 million to aggrieved borrowers.

In the spring of 2017, Frotman and his squad investigated thousands of complaints well-nigh a range of bug and found a agonizing design with PSLF:

Borrowers would notify their loan servicers of their intent to enroll in the program, then make it years into the repayment process before being told they didn't nevertheless qualify — considering they had the wrong loan, the wrong repayment plan or the wrong employer.

Sometimes servicers would be enlightened of a borrower's status as a public servant — agile-duty military, for instance — only not tell the borrower about the possibility of PSLF. For borrowers who needed to consolidate their loans to qualify for forgiveness, Frotman found, a process that should take taken thirty days often took much longer. Servicer employees appeared undertrained, uninformed and prone to a litany of paperwork mistakes.

"I thought, 'Oh bang-up, I must qualify for this programme,' " says Sarah Krainin, who used loans to pay for college and a master's degree and at present teaches at a nonprofit, public university in California. "And I asked my servicer at the fourth dimension, 'Am I gonna qualify for [PSLF]?' And they said, 'Aye, you take federal loans. You authorize.' "

Krainin says she fabricated life choices that were informed, at least in part, by that promise. Simply after making six years of payments, she recently checked in with the Education Department and was told she did not authorize, yet.

Krainin was told she could consolidate her loans and qualify for PSLF, but doing then would reset her countdown to loan forgiveness from four years back to 10.

"I've spent half dozen years thinking ane thing, and now it'due south some other," Krainin says.

She was devastated and pleaded for leniency with a serial of call-heart representatives, but got nowhere.

At last, with one call-middle agent, Krainin says, "I kinda let my guard down and said, 'This kinda sucks.' And [the representative] said, 'Yeah, it really sucks.' Just hearing her say that was a relief. Information technology wasn't 6-years-worth-of-piece of work relief, but it was a niggling bit of confirmation that this is not actually the mode things are supposed to be."

In June 2017, Frotman published the results of his CFPB investigation, titled "Staying On Track While Giving Dorsum," and he recommended that policymakers consider firsthand changes, including raising standards for servicers and giving more than flexibility to borrowers who accept been misled by their servicers.

Frotman was not the start Cassandra to warn the Education Department and lawmakers about the program, but his vocalization may have been the loudest and his case the well-nigh thorough. Yet, his recommendations cruel largely on deaf ears.

The lucky 1 percent

Subsequently that year, in Oct 2017, later on a host of warnings and blood-red flags, the floodgates opened, and the first generation of borrowers to consummate x years of public service began applying for loan forgiveness. Thousands of them.

It has at present been a year, and ane thing is clear: Frotman was right.

In his resignation letter of the alphabet, Seth Frotman accused the Trump administration of neglecting student borrowers. Cameron Pollack/NPR hide caption

toggle caption

Cameron Pollack/NPR

In his resignation letter, Seth Frotman defendant the Trump administration of neglecting student borrowers.

Cameron Pollack/NPR

The Department of Educational activity and the Regime Accountability Role (GAO) have both released reviews of PSLF that back up Frotman'southward CFPB findings.

The department's recent report card for PSLF, the program's first, was a revelation, describing a scale of dysfunction that surprised many in the loan industry. It found that, over the by year, almost 29,000 applications for Public Service Loan Forgiveness were submitted and candy. Of those, 99 percent were denied, the vast majority for "non meeting program requirements."

90-nine percent.

Just days subsequently the Pedagogy Department released its data, the federal government's contained watchdog weighed in with the results of its ain investigation. Investigators from the GAO institute that, more than than a decade into the plan, many borrowers and servicers notwithstanding appear confused about basic requirements.

Like Frotman's squad, GAO found evidence of pupil borrowers thinking they were on the path to loan forgiveness, just to "observe out months and potentially years later that [they] don't qualify and that [they're] not actually eligible for forgiveness," says GAO's Melissa Emrey-Arras, who led the investigation.

Some borrowers had the wrong loans or employers that didn't qualify. Others were in the wrong repayment plan. In fact, more than half of borrowers who asked to accept their loans and employment double-checked, to be sure they qualified for PSLF, "either did non meet basic eligibility requirements or had yet to make any qualifying loan payments," according to the report.

GAO's investigation establish a advice breakdown between the Education Department and FedLoan, the contractor that officially handles PSLF. For example, if a borrower calls and asks if her job qualifies as public service, the company'southward representatives told investigators they generally won't respond that question over the telephone — because they have no list of eligible employers.

"When the servicer that's responsible for implementing the program doesn't have a list of employers, that's difficult to understand," Emrey-Arras says, making articulate that the Educational activity Department deserves as much blame, if not more, for such failures.

"I'd say it's everybody's fault," says Robert Kelchen, assistant professor of college education at Seton Hall University. "I'd put more of the arraign on the Department of Instruction, considering educatee loan servicers can but actually do what the department tells them to do."

Kelchen says one big reason the program's initial rejection charge per unit is so high is considering, especially in the early days, PSLF's basic requirements were vague.

"Servicers didn't really have much amend data than borrowers," Kelchen says. "They were trying to assist students, only they were just using their all-time guess and trying to go through all of the dissimilar emails that the Section of Education would ship to servicers instead of actually putting together a guidebook to aid them out."

In its defense, the Didactics Department says it "is approving every eligible application for PSLF under the strict rules that Congress established ... The Department concurs with the [GAO'due south] recommendations and is committed to enhancing the procedure, outreach, and communications related to the program. We volition presently implement and promote a new, automated 'help tool' for borrowers and will increase communications to make borrowers aware of the tool and other resources related to loan forgiveness programs."

But this communication breakup is only part of the PSLF problem. Yes, servicers and their telephone call-center agents are often uninformed and unhelpful. But information technology'southward too clear, servicers sometimes fail borrowers, intentionally.

"They're doing a terrible job"

While at the CFPB, Frotman and his team institute a broad blueprint of servicer mistakes and mismanagement. Just days before Donald Trump'south inauguration, the bureau sued one of the nation's largest servicers, Navient, alleging the company "provided bad data in writing and over the phone [to borrowers], candy payments incorrectly, and failed to deed when borrowers complained about bug."

At the time, Navient was managing more than half dozen 1000000 student loan accounts for the federal government. Since then, five state attorneys full general have also filed suit: Illinois, Washington, Pennsylvania, California and Mississippi.

Navient declined to comment for this story, but its CEO, Jack Remondi, offered this spirited rebuttal when California announced its lawsuit:

The allegations are unfounded, and the lawsuit is another attempt to blame a single servicer for the failures of the higher educational activity arrangement and the federal student loan plan to deliver desired outcomes.

Remondi went on to remind Navient'due south critics that the government's student loan servicers do non "make, own or have a financial interest in the loans" they manage or "design the circuitous and confusing repayment options and enrollment requirements for borrowers."

FedLoan is also at the center of a land-led lawsuit. Massachusetts Chaser General Maura Healey is suing the servicer for its handling of both the PSLF program and the Teacher Education Assist for Higher and College Education (TEACH) Grant program.

"They're doing a terrible chore," Healey, a Democrat, told NPR earlier this year.

Healey alleges FedLoan has overcharged educatee borrowers and "prevented [them] from making qualifying monthly payments that count towards loan forgiveness, shifting the consequences of its loan servicing failures onto the student borrowers themselves."

FedLoan also declined to annotate for this story but has previously told NPR that the visitor "does not concur with the allegations made by the Massachusetts Chaser General'south Part." The company said information technology "remains committed to resolving outstanding borrower bug while post-obit the U.S. Section of Education's policies, procedures, and regulations every bit mandated past the Agency's federal servicing contracts."

In an ongoing investigation, NPR has documented FedLoan's mismanagement of the TEACH Grant plan, revealing that thousands of teachers who received college grants to teach in low-income public schools have unfairly had those grants converted to loans, with interest. The Education Section has since launched a "elevation-to-lesser" internal review of the programme.

And there's one more plow to this story — something Frotman tried to headline in his resignation alphabetic character:

The Trump administration has chosen sides in this fight over loan forgiveness, and it'due south non with borrowers. In the absence of federal efforts to rein in servicer mistakes and bad beliefs, states have tried to fill the void, passing increasingly tougher consumer protection laws and, occasionally, suing.

Unremarkably a fierce advocate for states' rights, Teaching Secretary Betsy DeVos is making a assuming legal argument: Considering these companies work for the federal government, they need not answer to state authorities. They are, in essence, protected from such lawsuits.

In response, one-half of state attorneys general, including reliably conservative Montana, Tennessee, Kansas and Texas, wrote to DeVos, urging her to reject this "ongoing campaign by pupil loan servicers and debt collectors to secure amnesty for themselves from state-level oversight."

Only this month, 12 state attorneys full general signed a pointed alphabetic character to DeVos, writing that "the shocking 99 percent PSLF program deprival charge per unit is quite merely unacceptable, and borrowers need fixes for the plan now."

Cupcakes

Seth Frotman was incorrect.

Not well-nigh the problems with Public Service Loan Forgiveness. They are legion, indeed. He was wrong about beingness able to have his daughters to the playground after turning in his resignation.

Despite grabbing headlines across the state, Frotman's resignation letter did not go him walked out of the building with a cardboard box. He stayed through the week.

In fact, CFPB leadership met his departure largely with indifference.

Days subsequently, Acting CFPB Director Mulvaney gave an interview to CNBC and was asked about Frotman'southward peppery departure.

"I never met the gentleman," Mulvaney said, laughing. "Don't know who he is."

The CFPB tells NPR in a statement: "While we disagree with the assertions made in [Seth Frotman's] resignation letter of the alphabet, we wish him the best in securing his future employment."

Fri, Aug. 31, was Frotman's concluding twenty-four hour period, and he did something unusual for a man who had, earlier that week, publicly savaged his dominate and the Trump administration:

He brought his wife and daughters to piece of work.

For parts of his 7 years at the CFPB, Frotman says, the work had ofttimes taken him away from home, and he wanted his girls to see where he'd been all this time, to sit in his chair, to play with his landline phone (their favorite part) and to encounter some of the colleagues who had become dearest friends.

They posed for pictures. His daughters dressed for the occasion, the 2-year-old wearing a purple sundress and necklace, the v-year-former in pink with a white blossom in her hair. Frotman wore faded jeans, sleeves rolled to the elbows.

"What practise you do?" his 5-year-one-time asked.

"We aid people," he replied.

Frotman says the visit was bittersweet, because he was proud of the work he had done and wished he could have kept doing it. He says his daughter could tell there was more than to his story, but cupcakes appeared and all was forgotten.

For the record, the cupcakes were not for Frotman's going-away party.

Someone else was leaving, too.

To hear our Planet Money episode on Seth Frotman and Public Service Loan Forgiveness, click here .

When Did Public Service Loan Forgiveness Begin,

Source: https://www.npr.org/2018/10/17/653853227/the-student-loan-whistleblower

Posted by: healeycoled1948.blogspot.com

Share this post