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Pepperdine University School of Law

Thursday, January 10, 2019

The Need For Better Eligibility Regulations In The Public Service Loan Forgiveness Program

Federal Student AidGregory Crespi (SMU), The Public Service Loan Forgiveness Program: The Need for Better Eligibility Regulations, 66 Buff. L. Rev. 819 (2018):

People will start seeking tax-exempt debt forgiveness under the Public Service Loan Forgiveness (“PSLF”) program in October of 2017 after satisfying the requirements of 10 years of post-October 1, 2007 employment in a “public service job.” I estimate that eventually 200,000 people a year or more will obtain debt forgiveness under this program, at a total cost to the Treasury of $12 billion/year or more. Estimates are that up to one-quarter of all employment will qualify as a public service job.

For such a large and costly program the precise eligibility criteria are crucial. The statutory definition of a public service job is very broad and specifically lists numerous categories of public service, and is in some ways ambiguous. The Department of Education (“DOE”) in 2008 issued regulations regarding PSLF program eligibility, but those regulations have serious deficiencies. First of all, the regulations improperly define a public service job in a manner that is inconsistent with the statute by imposing a “public service organization” employer requirement that is not in the statute. This requirement works to disqualify some statutorily-listed public service employment from debt forgiveness eligibility, in particular public services employment provided on behalf of for-profit businesses or certain non-profit employers, and also improperly allows eligibility for debt forgiveness for some employees of private non-profit employers who are not employed to provide a qualifying public service. Second, the regulations fail to clarify vague statutory language regarding what constitutes “public” service, most importantly regarding the scope of “public interest law services.”

The DOE has also recently rescinded several previously granted certifications of employment as qualifying on the basis of a newly imposed restrictive “primary purpose of the employer” requirement that is not in the governing statute nor in the DOE regulations, actions that have been challenged in court by the American Bar Association. Even if this restriction is upheld, which appears unlikely, there is a strong argument that the DOE should be estopped from rescinding prior certifications.

In order to avoid unnecessary litigation once the expected large number of applications for debt forgiveness begin to be filed after October of 2017, I recommend that the DOE first seek Congressional action to clarify the contours of the PSLF program’s eligibility statute, and while awaiting such action it should rescind its public service organization eligibility requirement that is inconsistent with the statute, clarify that there is no primary purpose of the employer requirement, and provide much more detailed guidance regarding the contours of the various statutorily-specified forms of qualifying public service, especially public interest law service. If PSLF program eligibility is to be either narrowed or expanded this should be done through appropriate legislation, and not through unauthorized and somewhat covert DOE actions.

See also Gregory Crespi (SMU), Will the Public Service Loan Forgiveness Program Ever Forgive Any Loans?

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How about we just eliminate this program altogether? Why should the federal government tilt the employment playing field for it's own "charity" preferential treatment for some jobs?

Posted by: ruralcounsel | Jan 10, 2019 3:41:40 AM

The second report on forgiveness numbers under PLSF came out in December 2018, and the Govt. is still denying over 99.5 percent of requests. Same as the first report.

PSLF is nothing but a hall of mirrors. An impossibly generous program that is completely outside of the norms under which our Govt. has operated for the last 50 years. It continues to exist because no one in Congress understands what it is, or how much it will cost.

Prof. Crespi's assumption that Congress will fix PSLF so that it works as intended is laughable. The minute forgiveness rates approach 10%, this program is gone. Simkovich understands this pretty well, as he wrote an entire post on Leiter's blog touting how inexpensive the program is seeing that it keeps students in a Kafkaesque bureaucratic nightmare and they never get paid. To Simkovich, that is a good reason to keep the program!

PSLF is locked in a catch-22 and there is no way out. No law faculty or administrator should ever be touting this program to students.

Posted by: JM | Jan 10, 2019 8:09:37 AM

The past tense used in this article is pretty jarring in light of the Department of Education only granting a fraction of one percent of PSLF requests over the last year. Also let's not forget that this administration wants to get rid of PSLF altogether while the previous administration was willing to limit forgiveness to $57,500, or barely over the sticker price for one semester at Harvard Law. It is politically unlikely that the PSLF fiasco is going to get better and not worse.

Posted by: Unemployed Northeastern | Jan 10, 2019 2:39:03 PM

Work for the politburo and loans are forgiven.

Posted by: Actual Lawyer | Jan 10, 2019 6:01:38 PM