Graduates applying for loan forgiveness should monitor the companies that service the loans

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Millennials who work as teachers, social workers, firefighters and others in public service should be able to get relief on their federal student loans.

But mistakes and misunderstandings, including snafus with the companies that service the loans, are driving up costs unnecessarily for college graduates, according to a federal consumer watchdog.

Congress created the Public Service Loan Forgiveness Program in 2007. One of the many requirements before a loan amount can be forgiven is that borrowers must make monthly payments on time for 10 years. Thus, the first eligible borrowers should see the remaining balance of their student loans canceled from October. Any debt eliminated under the program is tax exempt under current law.

But some borrowers will not be so lucky.

The Consumer Financial Protection Bureau says the 10-year path to debt forgiveness has been blocked by student loan officers who gave borrowers the wrong information about their loans, mishandled payment processing and spoiled other key parts of the process.

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Fresh grads will want to pay close attention to the rules, if they’re wondering how they’re going to pay off all those college loans.

According to the Institute for College Access & Success, seven in 10 college graduates from public and private colleges in 2015 had student loan debt, averaging $30,100 per borrower. Graduation debt varies widely by state and college.

In Michigan, the average was $30,045 in total, according to figures from the institute. But average debt load was higher for 2015 graduates at individual schools, such as Central Michigan University, Michigan Technological University, Western Michigan University and others.

Nationally, about 44 million consumers are juggling about $1.4 trillion in student loan debt.

If college graduates are even remotely interested in public service, they should realize that debt forgiveness rules can be very cumbersome and loan officers don’t always give you the better information.

The program itself is complex. To qualify, you must work full-time for an eligible employer for 10 years. Working for a union, a partisan political organization or a for-profit government contractor will not count, for example. But you could get relief working for the city, state, or federal government in any job. Many not-for-profit organizations would also be considered qualified employers. See

Borrowers must also be enrolled in a qualifying repayment plan, such as an income-driven repayment plan. Only payments made after October 1, 2007 count.

Mark Kantrowitz, publisher and vice president of strategy for, said students sometimes get tripped up because they don’t realize that rebate program loans should be part of the federal government.

“All conditions must be met for a payout to count,” Kantrowitz said. “If a borrower is unemployed or employed less than full-time, the payments don’t count.”

It is also important to realize that this program might not exist indefinitely. President Donald Trump’s proposed federal budget for 2018 calls for the elimination of the student loan exemption for workers in the public sector and nonprofit organizations. It is expected that those already in the program will be allowed to continue.

As things stand, college graduates need to stay on top of their bills — and how their loans are tracked — in order to hope for the day when some of their student debt can be forgiven.

The goal of the program itself was to encourage new graduates to take up careers in public service, which have more modest salaries, even if they faced the burden of student debt.

More than 500,000 borrowers have indicated they plan to apply for loan forgiveness – and nearly two-thirds of those borrowers earn less than $50,000 a year.

Consider that the average clinical social worker with a master’s degree owes $40,000 in student loan debt, but would typically earn about $28,800 in the first few years of social work, according to federal regulators.

Under a standard 10-year repayment plan, the social worker in this example would owe about $416 per month for student loan repayments, which would consume almost half of the worker’s discretionary income.

But under an income-driven repayment plan, the social worker could pay $89 a month for federal student loans, and the payments could count towards forgiveness of public service loans.

To qualify for the Civil Service rebate, you would want to enroll in an income-based repayment plan for Federal Direct Loans. An income-based repayment plan will set your monthly payments based on your income and family size.

This type of plan can keep your monthly payment manageable while you aim for loan forgiveness after 10 years of on-time payments. It’s also important to know that if you’re making payments under a progressive or extended repayment plan, your payments probably don’t qualify for the government loan service forgiveness.

The Consumer Financial Protection Bureau noted in a July report that borrowers were having trouble certifying employment. In some cases, they are wrongly denied participation in the loan cancellation program and borrowers do not know how to correct an error because the loan officer does not explain why they were refused for the program.

“Unfortunately, the services are taking shortcuts and they are not held accountable for the impact this has on borrowers,” said Seth Frotman, student loans ombudsman for the Consumer Financial Protection Bureau.

Frotman noted that the student loan industry has engaged in practices that delay, defer or deny access to scheduled debt relief.

The consumer watchdog agency is rolling out a “Certify Your Service” program to help public service employees get college loan forgiveness.

Guidance includes: Borrowers should submit an employer certification form to the US Department of Education to track progress of payments and notify the loan officer that they are working to cancel service loans public. Employers can provide the form through their human resources office. Borrowers must submit updated forms annually. See for more information about the program and a copy of the certification form.

Another tip: think twice before consolidating any existing federal direct loans. Be sure to determine if you have already made qualifying payments on these loans, if you are aiming for loan forgiveness. You will lose credit for any eligible payments you have already made if you choose to consolidate a direct loan.

Several details are listed on the certification form to better understand what is eligible and what is not. The more you read the rules – and pay attention to the companies that handle these loans – the better.

Contact Susan Tompor: 313-222-8876 or Follow Susan on Twitter @Tompor.

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