2017 Fall Commencement

Montana State University graduates receive their diplomas during the 2017 fall commencement ceremony at the Brick Breeden Fieldhouse.

After years of paying $400 a month on her college student loans, Michelle Wheat felt “devastated and defeated” when she found out that none of her payments would count toward the 10 years of payments required to get a big chunk of her debt forgiven.

“It broke my heart,” said Wheat, 31, a training coordinator for the Montana Department of Transportation in Helena, who bartends on the side to earn extra.

“I love my job,” Wheat said, who graduated from Carroll College in psychology. “You think that this program is designed to help you and that you’re doing everything right, but in the end there are loopholes designed to trip you up.”

She is just one Montanan out of millions of Americans who have been counting on the federal Public Service Loan Forgiveness (PSLF) program.

It was created to help teachers, nurses, law enforcement officers, nonprofit employees or public service workers find relief from student debt burden. Instead most are finding nothing but broken promises.

Jim Erven, 39, has worked in public service 10 years — six with the Missoula County Sheriff’s Department and four with Missoula’s City-County Health Department.

Erven phoned his student loan servicing company’s call center more than a dozen times over five or six years to make sure he still qualified for student loan forgiveness. Each time, “they told me I was good.”

Then late last year he called and this time was told “No.”

Navient, the largest of the loan servicing companies hired by the federal government, told him that all along, he had not been signed up in the right kind of plan. He demanded to talk to a supervisor and told her he had recordings of his previous calls.

“She said, ‘You were given the wrong information every time you called.’ She apologized and said there’s nothing she can do.

“I was shocked,” said Erven, a father of three, who graduated from the University of Montana. “This is terrible. I have $30,000 in student loan debt, I thought I was four years away (from loan forgiveness). … I feel like they let me down, they gave me flat out wrong information. I was misled.”

Congress created the Public Service Loan Forgiveness (PSLF) program in 2007, with bipartisan backing from Republican President George W. Bush and Democratic Sen. Ted Kennedy of Massachusetts.

It was intended to help millions of people by forgiving part of their college loan debt and to encourage people to work in jobs like teaching, social work and charities that traditionally are low paying but require advanced degrees.

The promise was that if people worked in public service jobs and faithfully made 120 monthly payments, after 10 years whatever was left of their student loan debt would be erased.

But now that more borrowers are reaching the 10-year mark and applying to have student loans forgiven, 99% of applicants have been denied.

That’s 99%, denied.

Just 1% were approved out of more than 86,000 people who applied as of March 2019, according to a report from the U.S. Department of Education.

Thousands were rejected because they didn’t have the right kind of student loan, a “direct” loan. Or they didn’t get into one of the right “income-based” repayment plans. Or their job didn’t qualify. Or they didn’t turn in the right paperwork, or fill out paperwork perfectly.

Many said they were told by loan service companies that all they had to do was simply work at a public service job and apply at the end of 10 years.

No one knows how many Montanans have been rejected, said Eric Feaver, president of the Montana Federation of Public Employees, the state’s largest union.

“This is a huge Montana and national story,” Feaver wrote. “You work 10 years and then … some bureaucrat says you’re in the wrong silo. It’s a pretty serious problem.”

Ten days ago one of the nation’s largest teachers unions, the American Federation of Teachers, filed a lawsuit in Washington, D.C., against the Department of Education and Secretary Betsy DeVos on behalf of the union and eight individual teachers.

The union alleged “gross mismanagement and out-and-out sabotage” of the loan forgiveness program and violations of borrowers’ constitutional rights to a fair process.

The lawsuit is asking the court to require the Department of Education to correct its errors and loan processing companies’ mistakes, and to create a way for denied borrowers to appeal.

AFT said it was seeking to bring “justice to millions of Americans who work in public service jobs and who are suffering under a crushing burden of student debt.”

The U.S. Department of Education doesn’t comment on lawsuits but told the New York Times it is “faithfully administering the complex program Congress created.”

The Wall Street Journal reported in May on numerous factors behind the broken promises. Congress made only “direct” loans eligible. The Obama administration didn’t advertise the program or create easy guidelines for borrowers or even the key loan service company, FedLoan Servicing, to follow.

Conservatives in the Trump administration, who would prefer PSLF was never created, have recommended ending the program’s funding entirely.

“We don’t think that one type of a job, one type of role should be incentivized over another,” DeVos said at an April congressional hearing.

Critics charge the program benefits highly paid people with master’s degrees, like professors and doctors at nonprofit hospitals.

Meanwhile, the number of people seeking loan forgiveness is only expected to grow.

More than 1 million borrowers nationwide have already started the paperwork to sign up. And the Consumer Financial Protection Bureau has estimated the number of borrowers making payments on potentially eligible loans at 32 million.

Still broken

It’s no secret PSLF isn’t working as intended.

Problems have been brought to light in lawsuits. Congressional hearings. Federal reports by the Government Accountability Office (in 2014 and 2015). The Consumer Financial Protection Bureau. Letters from state attorneys general. Newspaper, radio and magazine investigations.

And still it’s not fixed.

Congress tried to remedy the problems by passing the Temporary Expanded PSLF program. It offered millions to people who were rejected because they were in the wrong category of repayment plan.

More than 12,000 people applied for the Temporary Expanded PSLF program, the New York Times reported. But just 3.6% of those applications have been approved.

Congressional Democrats have blamed DeVos, but she has blamed Congress for creating a program with complicated rules.

In October 2017 Montana’s Republican Attorney General Tim Fox joined attorneys general from 20 other states plus Washington, D.C., in sending a letter to DeVos and the Department of Education. The letter protested the administration’s moves to block states that tried to go after loan service companies for “fraudulent and abusive practices.”

“As record numbers of Americans struggle to make their student loan payments each month, student loans in the United States are in a state of crisis,” the letter said. As of 2017, it said, Americans owed more than $1.3 trillion in student loans — more than the amounts for car loans and credit cards.

Before suing the Department of Education and DeVos, the AFT union in October 2018 filed a class-action lawsuit in New York against Navient, accusing the loan processor of negligence, giving borrowers the wrong information, and discouraging them from taking the steps they need to qualify.

The teachers’ union lawsuit has accused Navient of steering borrowers away from the program to avoid losing business to FedLoan, the only loan service company hired to handle public service loan forgiveness.

The student loan watchdog for the Consumer Financial Protection Bureau, Seth Frotman, sued Navient in 2017 for allegedly cheating borrowers “through shortcuts and deception.”

The lawsuit accused Navient of giving millions of borrowers bad information both in writing and on the phone, processing payments incorrectly, making borrowers pay more than necessary on loans, failing to tell them about deadlines and failing to act when people complained.

Navient is adamant it has done nothing wrong and asserted it’s doing a better job than other loan servicers.

Frotman resigned from the consumer bureau in protest last year, accusing the administration’s director of using the bureau “to serve the wishes of the most powerful financial companies in America.”

The loan ombudsman’s office received 23,000 complaints a year, the New York Times reported, and forced companies to pay $750 million in refunds to student borrowers.

The states of Illinois, Washington, Pennsylvania, California and Mississippi have also sued Navient.

The lawsuits are still making their way through the courts.

MSU’s financial coaching

At Montana State University, Keith Hamburg helps people to navigate the maze of student loan debt and educate graduates so they can avoid the pitfalls in loan forgiveness programs.

Hamburg is senior financial coach in MSU’s Office of Financial Education. The office works with current MSU students, alumni, faculty and staff.

Financial coaches speak to about 8,000 students a year at new-student orientation and visits to student clubs and classrooms.

In addition they offer hour-long, one-on-one coaching to about 1,500 clients a year on a variety of financial issues, from credit cards to student loans. The office is in the basement of the Strand Union Building, near the bowling alley and across from the Allen Yarnell student success center.

“Thankfully Montana State University has this Office of Financial Education in place to meet with students to make sure they have the tools to make sure they understand” loan programs and forgiveness programs, Hamburg said.

“We do our best to ensure they have the right instructions to qualify before they leave here.”

That means making sure they have the right kind of “direct” loan and the right kind of repayment plan.

Four repayment plans qualify, he said. Those are IBR (income-based repayment), PAYE (pay as you earn), ICR (income-contingent repayment) and the 10-year Standard repayment plan.

Repayment plans that don’t qualify for PSLF are the “extended” or “graduated” plans.

“We also help them understand that each year they must fill out an annual employment certification form,” Hamburg said.

He said 67% of MSU students take some form of financial aid to help pay for their education.

The average debt for MSU undergraduates this year is $27,764, up about $500 from last year, according to MSU’s Common Data Set.

Borrowers like Michelle Wheat might have benefitted from MSU’s type of financial education.

She graduated from Carroll College in 2010 but didn’t consolidate her loans until 2014. Only then did she find out that her four years of payments wouldn’t count toward public service loan forgiveness. She has paid off more than half her $27,000 in loans but still owes $12,800.

“I don’t think they should punish people who consolidate their loans,” Wheat said.

Her advice to today’s students is to consolidate their loans immediately after they graduate.

“Because I don’t think they’ll fix it. I’m not very hopeful,” she said.

Gail Schontzler can be reached at gails@dailychronicle.com or 406-582-2633. Follow her on Twitter @gailnews.

Gail Schontzler covers schools and Montana State University for the Chronicle.

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