Feeling lucky? About 2 percent of qualified applicants are forgiven of federal student loans

Caroline Brewer, a UNC first-year majoring in biology, began considering careers in the public sector after interning at a Durham-based global health nonprofit. She plans to go to graduate school for public health and realizes that she will likely have to take out loans, but is considering using the Public Service Loan Forgiveness program.

But it may not be that easy.

Federal Student Aid recently released data showing that only 96 of the approximately 28,000 borrowers who applied for PSLF since they became eligible in October 2017 have had their loans forgiven.

FSA reported 70 percent of applications were denied because they did not meet program requirements, while 28 percent were rejected due to missing or incomplete paperwork.

The program forgives any outstanding balance on direct loans, assuming that the borrower has made 120 qualifying payments under an income-driven repayment plan while working full-time for a government organization or an approved not-for-profit.

“If they’re advertising this program, and they’re saying if you go into public service, this loan forgiveness is an option, people might take that at face value, which could be a little bit detrimental,” Brewer said. 

She said if more people apply for the program without completely understanding the requirements, the number of submitted applications could rise and processing times for loan forgiveness applications could increase. 

Persis Yu, the director of the National Consumer Law Center’s Student Loan Borrower Assistance Project, said the requirements themselves may not be very clear.

“There are a number of different criteria that borrowers need to meet and some of them are more obvious than others," Yu said. "It’s obvious that borrowers need to be in a public service job, but it’s not obvious what that means.”

Clare McCann, the deputy director for federal higher education policy with New America, acknowledged the difficulties borrowers face but emphasized the importance of managing paperwork.

“I think it is widely accepted that the federal government could make it a lot easier on borrowers if it could simplify its forms, but at the end of the day it’s not an incredibly complex form," she said. "It’s just important that you’re getting all of the technicalities right." 

Frederick Hess, the director of Education Policy Studies at the American Enterprise Institute, said borrowers have a responsibility when they take out a loan. 

“I think if you borrow money from taxpayers, the right model is you should be expected to repay the money," Hess said. "The idea that loans should be forgiven for anybody seems to me a problematic notion.”

He believes PSLF's goal to encourage people with significant student debt to enter the public sector might be problematic because it implies that working in the public sector is a better choice than working in the private sector, and he thinks people should make that choice for themselves.

McCann said she is optimistic about the future of PSLF, given that the program is still very new. 

“Big picture, I think it’s very likely that many more applications will be approved and many fewer will be denied as we move forward, although it is obviously problematic and very concerning that so many were denied in this first batch," she said.

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