A new bipartisan bill proposed by Senators Maggie Hassan (D-NH) and Marco Rubio (R-FL) hopes to ease military service members' path towards student loan forgiveness, Yahoo Finance has learned.
“Service members take enormous risks to protect our freedoms, and it is unacceptable that members of the military can return home after active duty and not be any closer to receiving loan forgiveness,” Senator Hassan said in a statement provided to Yahoo Finance. “This bipartisan bill is a commonsense fix to help some of our country’s most deserving public servants get out from under the burden of their student debt more quickly.”
The Recognizing Military Service in PSLF Act, officially introduced on Thursday, aims to help military borrowers leverage the Public Service Loan Forgiveness Program (PSLF) by counting military student loan deferment or forbearance during deployment "as qualifying payments to PSLF so that service members who deploy have their periods of service appropriately counted toward their loan forgiveness."
The PSLF program enables government and non-profit employees with federally-backed student loans to apply for forgiveness after proof of 120 monthly payments under a qualifying repayment plan.
Through January 2020, according to a recent Government Accountability (GAO) report, there were 176,906 active-duty service members with federal loans eligible for PSLF.
However, few have applied and only a handful of those have been cancelled. Furthermore, loans placed into deferment or forbearance during a deployment currently do not count as PSLF qualifying payment.
“Currently, active-duty members of the military who pause student loan payments during a deployment get the short end of the stick when it comes to benefitting from the Public Service Loan Forgiveness program,” Senator Rubio said in a statement to Yahoo Finance. “This shouldn’t be the case — our service members make an incredible sacrifice to serve our country, and we should do everything in our power to recognize their service and provide them with the option for loan forgiveness.”
If the bill is signed into law, the DoD and Education Department (ED) would decide how to implement the change for the impacted service members and whether it would be automatic for future applicants or require an opt-in. It's unclear how many active-duty service members would be affected by the legislation.
'A major warning sign'
The sheer level of failure of the PSLF program, both generally and for service members, is stunning.
Upwards of 98% all of the applications from the general public — including teachers, firefighters, police, and other public servants — are rejected.
“We have quite a history documenting how the promise of public service loan forgiveness has been broken for borrowers around the country,” Seth Frotman, executive director of the Student Borrower Protection Center (SBPC), told Yahoo Finance in November 2020. “But the failures of the student loan administration have in particular harmed military borrowers, both service members and veterans.”
Of the 176,906 active-duty service members with federal loans eligible for PSLF, according to the recent GAO report, only about 19,000 service members opted in to PSLF. (The majority of these applications came from service members in the Army, followed by the Air Force, the Navy, and the Marine Corps.)
Among those who applied and qualified for forgiveness after 120 qualifying payments — which requires borrowers to submit an Employment Certification Form (ECF) on an annual basis or when borrowers changes employers — only 124 military service member applications were approved. (The most common reason for denial, according to the GAO report, was "not enough qualifying payments, missing information such as a signature on the form, and no eligible loans.")
The fact that only 124 active duty service members had their loans discharged via PSLF "is a major warning sign," Mike Saunders, director of military and consumer policy at Veterans Education Success told Yahoo Finance. "More than 200,000 currently serving have federal student loans. It has been over four years since the PSLF program should have started forgiving the student loans of those who are performing the quintessential public service."
Military service members hold roughly $3 billion in student loan debt, according to the SBPC.
“What is so infuriating about this is that the Department of Education knows every single military borrower, because they have to do the match for purposes of the Servicemembers Civil Relief Act,” Frotman told Yahoo Finance. “The federal government has all the information they need to figure out and determine who is eligible for public service loan forgiveness. But instead they have allowed — for over a decade — members of the military to just languish in this broken system.”
Saunders added that Veterans Education Success "is calling on the Education Department to use existing congressional authority to make sure federal student loan holders who have served on active duty since 2007 get credit for PSLF. And we welcome more bipartisan congressional action to make sure that from now on, more active duty service members get the credit for PSLF that they have earned."
Aarthi is a reporter for Yahoo Finance. She can be reached at email@example.com. Follow her on Twitter @aarthiswami.