The Latest Bad News about Law Student Loans

The Public Service Loan Forgiveness (PSLF) Program forgives the remaining balance on direct student loans after 120 qualifying monthly payments have been made under a qualifying repayment plan while working full-time for a “qualifying employer,” i.e.,
Government organizations at any level (federal, state, local, or tribal)
Not-for-profit organizations that are tax-exempt under Section 501(c)(3) of the Internal Revenue Code
Other types of not-for-profit organizations that are not tax-exempt under Section 501(c)(3) of the Internal Revenue Code, if their primary purpose is to provide certain types of qualifying public services
Serving as a full-time AmeriCorps or Peace Corps volunteer also counts as qualifying employment for the PSLF Program.

The PSLF was created under President Bush in 2007, meaning the first borrowers have just now become eligible for loan forgiveness. To date, 553,000 borrowers are on track for forgiveness.

The 2018 White House budget proposal would eliminate the PSLF for new borrowers on or after July 1, 2018. A huge sigh of relief was heard nationwide when the Department of Education clarified that existing borrowers would be “grandfathered.”

That sigh has now morphed into a cry for help. The Trump administration is going the extra mile, sub rosa, to destroy the PSLF for the “grandfatherees.” Two sources have alerted me to a new, undocumented policy, namely to take away credit for certain monthly loan payments. The examples cited work like this:
A borrower loses credit for any month in which s/he made a loan payment before the due date.
A borrower loses credit for any month in which s/he made a larger payment than required in order to reduce the principal owed.

The instructions on the PSLF web page do not include these caveats.

I spoke to one borrower (a federal government attorney) who just made her 120th payment and eagerly looked forward to having the rest of her six-figure student loans forgiven. When she contacted the Education Department to obtain the requisite form to apply for relief, she was told that she would receive credit for fewer than half of her payments because she had made a majority of them before their due dates and occasionally made larger payments than required. When she protested, she was told that her diligence indicated that “you probably did not need to borrow money for law school.”