- Student-loan borrowers placed on deferment while in school may be blocked from PSLF.
- Sen. Bob Menendez wants the Education Department to expand relief to those borrowers.
- In the past, loan servicers have placed borrowers on in-school deferment against their requests.
A student-loan forgiveness program is undergoing a series of reforms, following years of flawed implementation. A Democratic lawmaker wants President Joe Biden's Education Department to take those fixes a step further.
On Thursday, New Jersey Sen. Bob Menendez sent a letter to Education Secretary Miguel Cardona — first reviewed by Insider — detailing concerns with the Public Service Loan Forgiveness (PSLF) program. While the program is intended to forgive student debt for government and nonprofit workers after ten years of qualifying payments, those who are placed on deferment by their loan servicer while in school are left out of relief. Menendez said this has "derailed" the program and failed to give all public servants relief the program intended.
"I am concerned that without corrective action, numerous public servants who were working in public service jobs while attending school will be left out of the current waivers and flexibilities being offered by the Department," Menendez wrote.
In October, the department announced reforms to PSLF, included a waiver through October 31, 2022 that allows an past payments, including those that had been deemed ineligible, to qualify toward loan forgiveness progress. But borrowers placed on in-school deferments, as Menendez noted, may not be able to access that additional relief. Those deferments allow a borrower to postpone loan repayment while they're in school, but if they choose to return to school and wish to continue paying off their previously acquired loans, loan companies may take actions to prevent that from happening.
A report from the Consumer Financial Protection Bureau in 2017 found that despite borrowers requesting to remain on a repayment plan while in school, "their servicer will automatically place their loans into in-school deferment, preventing borrowers who work in public service while attending school from making qualifying payments under PSLF," adding that it could take months for the borrower to be places back onto a repayment plan, "resulting in unnecessary accrued interest and missed qualifying payments."
To ensure those public servants can access relief they qualify for, Menendez requested that the department include in-school deferments in any future waivers or reforms to the program.
The department has not yet commented on those deferments specifically, but it recently unveiled its list of regulatory proposals to improve loan forgiveness programs, including PSLF, by making the relief easier to qualify for. While those rules could take at least a year to implement, Biden is also in the process of deciding broad student-loan forgiveness for federal borrowers — a decision likely to be announced in July or August, before payments are set to resume.