Clarification: This article has been updated to clarify the status of the lawsuit between the AFT and Navient, as well as Navient’s future in the student loan business.
Teachers who had their applications for loan forgiveness denied are getting a second look under the terms of a new settlement agreement between the U.S. Department of Education and the American Federation of Teachers.
The department has agreed to reconsider upon request the application of any borrower who pursued the federal Public Service Loan Forgiveness program and was denied, and to automatically review all applications from borrowers that have made payments on a direct loan for at least a decade and were denied before November 2020. The department will also send detailed notices to borrowers who were denied again, letting them know how many more payments they need to make, how to determine which payments will qualify, and who to contact to receive guidance.
The settlement comes a week after the department announced that it would overhaul the Public Service Loan Forgiveness program and forgive the debts of tens of thousands of borrowers. The program—which was established in 2007 to forgive the student loans of teachers and other workers who devoted a decade of their lives to public service—has long been criticized for its confusing, complicated, and poorly communicated application process that has left the majority of qualified borrowers unable to achieve loan forgiveness.
“This settlement we just made ensures that a promise made is a promise kept,” said AFT President Randi Weingarten on a press call Wednesday. “The agreement, the settlement, unravels a Gordian knot of PSLF’s botched application. ... It was worse than the worst maze that anyone has ever gone through.”
The second largest teachers’ union filed the federal lawsuit against former U.S. Secretary of Education Betsy DeVos in July 2019, arguing that the education department has “saddled [public servants] with exceedingly burdensome student debt” through processing errors and inaccurate information provided by loan servicers. Borrowers were wrongly told they were on track for loan forgiveness, only to later find out they were not meeting certain requirements, AFT said.
The Public Service Loan Forgiveness program has been the target of lawsuits, government watchdog reports, and a sweeping NPR investigation for its mismanagement. Borrowers were denied for small paperwork errors, and people would spend months—or years—making payments only to find they weren’t eligible for forgiveness.
To qualify for loan forgiveness, borrowers had to be on an income-driven repayment plan with a federal direct loan. They had to make 120 monthly payments toward their loan, and those payments had to be on time. There was so much red tape that fewer than 2 percent of the program’s applicants have received relief, the AFT says.
The department announced last week that it would temporarily waive many of those requirements and do so retroactively. Those changes will mean that about 22,000 people are eligible to have their loans forgiven automatically, and another 27,000 borrowers could see their debts forgiven if they can prove that they previously made payments while working in public service, according to the department.
In a statement, spokeswoman Kelly Leon said the department is “pleased to settle this litigation” and looks forward to working with groups like the AFT to “further improve the PSLF program.”
“For too long, Public Service Loan Forgiveness has failed to live up to its promise of debt relief to our nation’s public service workers,” she said. “The Biden-Harris Administration takes that promise seriously and is already making the changes necessary to remove the burden of student debt on those who serve our communities and our country.”
The department will cancel the loan balances of plaintiffs
Weingarten said the settlement will give “muscle and teeth” to the changes announced by the education department last week by establishing a clear review process. She also criticized DeVos and the prior administration, saying that DeVos could have made these bureaucratic changes to provide relief for borrowers, but “instead of fixing it, she brought motion after motion to dismiss this lawsuit.”
Under DeVos, the department announced it would simplify the amount of paperwork needed to go through the loan forgiveness process—a change that Weingarten called at the time “a Band-Aid that does little to heal a gaping wound.”
Through the settlement, the department has also canceled the remaining loan balances for the eight AFT members who signed on as plaintiffs in the case—a total of about $400,000 in debt.
Plaintiff Debbie Baker, a choir teacher in Tulsa, Okla., will have more than $80,000 in loans discharged. On a press call, she teared up as she recalled receiving incorrect information from her loan servicer for years, resulting in thousands of dollars owed in interest and fees. Baker contacted “anyone who would listen,” she said, “and quickly I realized that nobody cared, and I was just a little fish in a great big pond.”
“This is just life-changing to be able to go to school, teach every day, and not have to deal with the anxiety and the anguish and the guilt of being trapped by debt,” Baker said.
In 2018, AFT also brought forth a class-action lawsuit against Navient, one of the largest federal student loan servicers, from nine teachers who alleged that the provider gave borrowers “inaccurate and misleading information” for financial gain. Navient recently announced that it intends to exit the government-owned student loan business, although the Department of Education has extended its contract through September 2023.
Navient and AFT agreed to settle the suit last year, but class action objectors have since appealed the agreement. Navient and AFT are fighting the appeal, but Weingarten said on the call that she’s confident AFT will win that settlement as well.