The Panic Over Public Service Forgiveness Certifications Is Unnecessary

Michael Lux Blog, News, Student Loans 0 Comments

In a very well publicized lawsuit, four attorneys claim that they were wrongly denied certification of their public service employment for purposes of Public Service Student Loan Forgiveness (PSLF).  Their complaints about the Department of Education certainly seem well justified.  Allegedly, these attorneys submitted the necessary paperwork documenting their public service, and their loan servicer, FedLoan Servicing, sent letters certifying that the payments qualified.  After making certified PSLF payments, in some cases for years, the four attorneys received letters indicating that their work actually didn’t count and all of their previous payments were voided.  In short, they had to start over again in their quest for the required 120 certified payments for PSLF.

While the individual issues raised by the four attorneys in this case seem justified, the ensuing fear raised by the media misses the mark.  According to The New York Times, “More than 550,000 people have signed up for a federal program that promises to repay their remaining student loans after they work 10 years in a public service job.  But now, some of those workers are left to wonder if the government will hold up its end of the bargain — or leave them stuck with thousands of dollars in debt that they thought would be eliminated.”  Message boards, blogs, and discussion centers around the fact that these 550,000 people are in danger of losing out on PSLF.

The Reality

For the vast majority of Public Service Loan Forgiveness, the language of the statute is very clear.  If you work for a 501(c)(3) not-for-profit organization or for the government, you qualify.  This is certainly the case for most of the 550,000 applications for PSLF to date.  Where things get complicated, like they did in this lawsuit, is when the language of the statute isn’t as clear.

In this case, it is worth visiting the exact legal language.  The Code of Federal Regulations, 34 C.F.R. § 685.219, specifies that a “public service organization” is the following:

  1. A Federal, State, local, or Tribal government organization, agency, or entity;
  2. A public child or family service agency;
  3. A non-profit organization under section 501(c)(3) of the Internal Revenue Code that [meets certain requirements];
  4. A Tribal college or university; or
  5. A private organization that— (i) Provides . . . public services [including] public interest law services [or] public service for individuals with disabilities and the elderly, [or] public education . . .; and (ii) Is not a business organized for profit, a labor union, a partisan political organization, or an organization engaged in religious activities, unless the qualifying activities are unrelated to religious instruction, worship services, or any form of proselytizing

Most PSLF applicants will be either government employees or working for 501(c)(3) non-profits.  The lawsuit making waves in the news centers around the much more ambiguous terminology in part 5.

If you are applying for PSLF

For starters you should absolutely continue sending in certification forms on a yearly basis.  While yearly certification is not required, it is the best way to document your progress and make sure you are on the right repayment plan.  The lawsuit does raise issues regarding the binding nature of these forms, but from a borrower perspective, it is still the best way to make sure you are on your way to PSLF.

The people who need to worry are the ones who work for organizations like the plaintiffs in the lawsuit: The American Bar Association, Vietnam Veterans of America, and the American Immigration Lawyers Association.  If your employment isn’t for a government or 501(c)(3), the lawsuit should be very closely watched.

The Panic Misses the Mark

The attention the lawsuit has generated is both good and bad.

It is good in the sense that it is shedding light on some borrowers who were treated poorly by their loan servicer and the Department of Education.  A victory for student loan borrower rights would certainly be a good thing.  However, the fear behind the idea that PSLF certifications are suddenly going to be invalidated is wrong.  It generates nice headlines, but isn’t reality.  Worst of all, it misses the most important point and the biggest issue raised during the lawsuit… but that is a subject for tomorrow.