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Among the propositions in Donald Trump’s budget for the fiscal year of 2021 is slashing $5.6 billion dollars from the Education Department. This includes an overhaul of current student loan forgiveness programs.

The plan for doing this includes canceling Public Service Loan Forgiveness, established by Congress under the Bush administration in 2007, to reward federal student loan borrowers for entering a public service career by forgiving their debt after ten years of monthly payments, or 120 consecutive payments.

The justifications for this, according to Trump and Education Secretary Betsy DeVos, is to save money that would be lost by forgiving these federal loans. Instead, the White House has proposed a simplified federal loan forgiveness program that, in theory, should allow student loan borrowers to pay them off five years sooner than the current income-based forgiveness program.

Analysis:

With this proposed rule change, the Trump administration is trying to distract from the mishandling of the Public Service Loan Forgiveness program by Fed Loan Servicing, a branch of the Pennsylvania Higher Education Assistance Agency (PHEAA).The handling of the Public Service Loan Forgiveness by FedLoan Servicing has come under scrutiny in recent years. According to NPR, 99% of applicants to the PSLF program were rejected.

The Government Accountability Office (GAO) cited the reasons those with student debt are having issues with the program include  borrowers not having the right loans, unqualified employers, being enrolled in the wrong payment plan, not being eligible in the first place, or being “yet to make any qualifying loan payments.”

When the program was launched in 2007, initial instructions to loan servicers managing this program were vague at best. However, the repeated pattern of mismanagement by FedLoan Servicing indicates a deliberate pattern of misbehavior.

Given the government’s current relationship with  PHEAA, any accountability from the PHEAA seems unlikely. Trump’s former campaign manager for the state of Pennsylvania is a lobbyist for the PHEAA, so in exchange for helping Trump on the campaign trail, one is likely to expect tit for tat.

Also, while the Consumer Financial Protection Bureau does have the authority to provide oversight of Federal loans, it has abandoned that responsibility completely. This is largely thanks to the installation of the CFPB’s current ombudsman, Robert Cameron, the PHEAA’s former “deputy chief counsel and vice president of enterprise compliance.” Under Cameron, the CFPB’s responsibilities to oversee Federal Service Loans has been abandoned.

Given this context, it is likely that canceling the very program that the PHEAA has been recklessly mismanaging for years is just another way to protect its interests, instead of holding it accountable for extorting money from thousands of students.

RESISTANCE RESOURCES:

  • Democracy Forward: “In 2017, we founded Democracy Forward to help expose the rampant corruption in the Executive Branch and fight it in court on behalf of the people it hurts.”
  • Student Borrower Protection Center: “The Student Borrower Protection Center is a nonprofit organization solely focused on alleviating the burden of student debt for millions of Americans. The SBPC engages in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance economic opportunity for the next generation of students.
  • Student Debt Crisis: “Student Debt Crisis is a non-profit (501c4) organization dedicated to fundamentally reforming student debt and higher education loan policies. Student Debt Crisis (SDC) takes a personal approach to member needs—working directly with borrowers to understand their challenges and fears, repayment obstacles and frustrations. SDC tackles the challenges of loan refinancing and consumer protection policies with media and legislators, as well as educating borrowers and higher education experts with lectures, webinars and special events.”
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