'Landmark settlement' reached on key loan forgiveness program
Yahoo Finance's Aarthi Swaminathan explains the settlement reached by the Dept. of Education and the American Federation of Teachers on the Public Service Loan Forgiveness program
Video Transcript
- The country's largest teachers union has secured a landmark settlement with the Department of Education over a troubled loan forgiveness program for public servants. Let's bring in Yahoo Finance's Aarthi Swaminathan who covers this space for us. Aarthi, what exactly does this settlement mean?
AARTHI SWAMINATHAN: Yeah, Kiko. So this is regarding a very controversial program like you mentioned. It was-- it's basically the result of a 2019 lawsuit that was filed against the old education Secretary Betsy Devos. I'm sure a lot of people are familiar with her over the mismanagement of the public Service Loan Forgiveness Program. Just to recap, the Public Service Loan Forgiveness is meant for firefighters, teachers, college professors, government employees. Basically they can use this program that was created by Congress in 2007 and you can get loan forgiveness if you make 120 monthly payments, which is basically 10 years.
But cancellation has just been so elusive you know. As of April, there was an approval rate of 2%. So this system basically hasn't worked, but this settlement actually comes on the heels of the education department. A couple of days ago, they announced tweaks which are very similar to this. The settlement basically means four things. Number one, 400,000 in debt canceled for eight plaintiffs. Just think about that amount of debt that these people have been holding on for how many years, right. They're going to have if you have application for denied, you will get it reconsidered, there was no reconsideration process for this. There will be an automatic review of rejected applications prior to November 2020, and you will actually also get a progress update, a detailed notice on how far along this 120 payment cycle you are.
So it is kind of interesting. We've covered this for years, heard from so many teachers, and I recently today heard from a clerk at the fire department of New York who have all just said the system isn't working for me. I worked for 20 years for the government like what is this promise that they haven't filled? But I just want to also flag this quote by Randy Weingarten who basically is one of the named plaintiffs on this lawsuit. And she was saying that this agreement unravels the Gordian knot of PSLF's implementation and shows the power of advocacy and collective action. It represents a game-changing victory for the millions of educators, nurses, public employees, and other AFT members yoked to crushing monthly repayments that have upended their lives and gives muscles and teeth to the Education department's reforms to PSLF announced last week.
- I mean, Aarthi, you kind of document in this article on Yahoo Finance you know looking at exactly how much. I mean, it's life changing money. You're talking about people who went into a life of teaching. One of the teachers that you followed here 18 years at a title I low income school going to have more than $80,000 in student loans just charged. And I mean, for those who are, I guess also pursuing a similar life out there, I mean, what does it change for them and the idea of this program moving forward?
AARTHI SWAMINATHAN: Yeah, according to the education department you know all of these tweaks could mean that a 550,000 more people can actually qualify for forgiveness. It's not that these people haven't been paying the debt, they've been on either the wrong repayment plan, their payments have been counted. It's all basically bureaucratic like the system didn't process their payments and things like that. So by having the ability to have their applications reviewed, a simple step is going to basically in the education department's view going to free up so many billions of of debt. So that's why the promise of this is. There's just so much interest from lawmakers to fix this program. And so hopefully we're going to start seeing this 2% rate increase, but if not you know we're going to report about it and we're going to flag it.
- Mark, I mean, Arthur with some great reporting there. I'd encourage everybody to check that article out on Yahoo Finance talking about that settlement and the life changing money coming into many of those plaintiffs.
