Over 550,000 US graduates have taken advantage of a Department of Education scheme which promises to repay graduates' remaining student loan debt if they work for 10 years in a public service job. Now, the Education Department has said the program isn’t legally binding and could be rescinded at any time.
Should this happen, over half a million Americans would be left to pay thousands of dollars in student debt themselves.
Four graduates were recently told their jobs no longer qualified for the loan forgiveness program, despite initially being told they were eligible. The four have now filed a lawsuit against the Education Department.
The program, which is intended to encourage graduates to work in the public sector, where wages are often lower than in the private sector, was introduced by the federal government in 2007. FedLoan Servicing, the administrator of the program, has been criticized for a lack of transparency over how applications are handled. Graduates must submit a new certification form every year for ten years in order to be considered.
Jamie Rudert, one of the four plaintiffs, was told last year his job was no longer eligible for the program, despite there being no problems with his certification form in each of the previous four years. He was told his application “had initially been approved in error” and that the new decision was retroactive, meaning none of his previous work was eligible. He has not found any way to appeal the decision.
He told the New York Times: “It’s been really perplexing. I’ve never gotten a straight answer or an explanation.”
According to the Department of Education, an approval letter “does not reflect a final agency action on the borrower’s qualifications”, meaning hundreds of thousands of graduates could have their approval reversed at any time.
As the program requires 10 years of service, the first applications for debt forgiveness will be made in October this year. Hundreds of thousands of graduates and current students will be watching on anxiously to see if the Department of Education honors their promise.
Lead image: Chandler Abraham (Flickr)