Troubled student loan forgiveness program gets an overhaul

Troubled Student Loan Forgiveness Program Gets an Overhaul

The Education Department outsources the work of billing debtors and guiding them by means of the compensation course of to employed distributors. FedLoan, which holds a contract to handle the accounts of debtors pursuing public service loan forgiveness, informed the company this summer season that it will not renew its contract when it lapses on the finish of the 12 months. It mentioned that the “increasingly complex and challenging” work of servicing federal loans had turn out to be too expensive.

Another main servicer, Navient, mentioned final month that it, too, is resigning to concentrate on its different strains of enterprise. Those defections and people of a number of smaller servicers imply that the Education Department might want to transfer not less than 16 million accounts to new servicers within the coming months — a course of that has prior to now been stuffed with confusion and errors. Agency officers mentioned they didn’t but have a successor to FedLoan lined up.

Kristi Jacobson, a second-grade trainer at George R. Moscone Elementary School, in San Francisco, was cautiously optimistic in regards to the prospects of reduction.

Ms. Jacobson discovered in June that not one of the funds she had been making on her loans since 2005 certified for forgiveness. She had additionally been submitting the annual paperwork for this system since 2014. She discovered when she stuffed out a kind on the Education Department’s web site that suggested her to consolidate her loans into one which certified for public service loan forgiveness. The information surprised her.

“I got goose bumps,” she mentioned. “I read it over and over.”

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The 54-year-old had been trying ahead to retiring in 9 years. Instead, she could be restarting the clock on 10 extra years of funds on her $86,000 loan, at $550 per 30 days, after she consolidated her Federal Family Education Loans right into a qualifying loan this summer season.

“I don’t think I should get a free ride,” Ms. Jacobson mentioned. “I borrowed this money for my education, and I should pay it back. But to be 54, and to think: Oh, I’ll never buy a house. It’s like being in a Kafkaesque tunnel.”

“I’ve been told that good things are on the way,” she added, “but I can’t believe it until it happens.”