Department of Education Hit with Lawsuit Over Mismanaged Student Loan Forgiveness Programs

The Department of Education recently came under fire in a lawsuit alleging it is mismanaging two student loan forgiveness programs.

Student loans have been in the news a lot, with many presidential hopefuls touting promises of student loan forgiveness and what not. But how realistic is total student loan forgiveness, especially when people currently signed up for forgiveness programs are having trouble getting their loans forgiven? For example, a recent lawsuit filed Thursday against the U.S. Department of Educations and Education Secretary Betsy Devos claims millions of public sector employees, including teachers, “have been denied relief of their student loan debt under government programs because of mismanagement by the U.S. Department of Education.”

The lawsuit was filed by the American Federation of Teachers on behalf of a handful of alleged victims. It argues the Department of Education has “long bungled its management of the programs, leaving borrowers who followed the rules stuck with their entire student debts.” The complaint states:

“(The department) has eviscerated the statutory promise of loan forgiveness for those who have spent a decade or more in public service dutifully repaying their loans.”

Additionally, the suit argues that many innocent borrowers have “fallen into a bureaucratic nightmare in which their loan forgiveness requests were improperly denied or they were not told of technical errors that could be easily fixed that left them ineligible.” As a result, millions have been left with hefty loan repayment amounts with little relief in sight.

The lawsuit focuses specifically on two government programs, one created in 2007 by Congress and one created last year to forgive any remaining student loan debt for graduates working as “teachers, nurses and in public sector jobs who make timely payments on their loans, typically for 10 years.” Despite the creation of the two programs, it’s estimated that as of March, fewer than “1% of borrowers who applied under the first of the two programs, and only 3.6% under the second one had their loans forgiven.” On top of that, the department allegedly “failed to give borrowers a meaningful way of contesting denials, as well as failing to oversee properly the private subcontractors that service and administer the programs,” according to the suit.

One of the plaintiffs, Deborah Baker, was promised by her loan servicer that she would “qualify for debt forgiveness, only to learn her loan was ineligible, something she could have corrected had she known.” Baker works as a public school teacher in Tulsa, Oklahoma and is now left with $76,000 in unforgiven student loan debt.

When commenting on the pending litigation, Department of Education press secretary Liz Hill said:

“The department does not comment on pending litigation, but I would point out, that the department is faithfully administering the complex program Congress passed.”

Sources:

Borrowers left in lurch as U.S. mismanages student debt relief: lawsuit

Teachers union to sue Education Department over student loan forgiveness program