Student Loan Forgiveness Program Approval Letters May Be Invalid

[nachos31]

https://mobile.nytimes.com/2017/03/30/business/student-loan-forgiveness-program-lawsuit.html?referer=

And I already thought FedLoan Servicing was an abomination of an entity, but reneging on their employer certification forms!? What a truly vile and incompetent entity.

It'll be interesting to see where those lawsuits go bc this could have tremendous implications.

[jhwkr542]

I don't see how working for any 501c3 would not qualify. It's pretty black and white the way it's written.

[Queue]

This topic keeps me up at night. My wife is a military resident and we've only just started making our REPAYE payments towards the goal of loan forgiveness. With such enormous financial repercussions for us, I can only hope that any and all kinks are worked out with this first wave of loan forgiveness, and that any changes (if any are indeed made) to the program will be outlined clearly, specifically if those already in the current program will be grandfathered in.

[Frenchy1011]

Definitely nerve-wracking. Hopefully the work for major hospital health systems is a reasonably straight forward 501c corporation. I've done at least 3 Employment Certification Forms to date and all have been approved. I don't blame the person in the article who is so upset about an initial certification and then a follow up denial for doing the same job!

 

And gotta cross the fingers for the grandfathering in if things change!

[ENT Doc]

This whole thing is a mess.  The very organization that has fueled the student debt bubble (federal government) and that demonstrates gross incompetence on a regular basis should be trusted to do the right thing?  I don't know whether to laugh or cry any more:

"Last week, the department filed a reply that said that FedLoan’s responses to borrowers’ certification forms cannot be trusted."

I mean, who else can get away with such blatant incompetence?  In the market you have choices.  With these bozos we don't. That all being said, I find it troubling that the American taxpayer should be on the hook for a program that inspires additional bloat in an organization so irresponsible.  Kudos to those who take advantage, but the whole set-up from the initial loan amounts (and what inspired them) to the forgiveness only drives higher future education costs.  Another example of the federal government doing more harm than good.

[Raymond Oliver]

This keeps me up at night, also.  As a neurosurgery resident (8 years with a fellowship) and $390k in student loan debt, my entire financial future is relying on PSLF.  Those monthly IBR payments really hurt and I could have been investing that money if I simply put my loans in forbearance through residency.

[Craigy]

This is one reason that I chose to refinance instead of pursuing forgiveness.  I knew it would literally keep me up at night.  For us, it was more of a wash and we didn't have 300k+ of loans outstanding, so that made it easier to refinance.

There is precedent for requirement of strict compliance in federal programs, e.g. national flood insurance program.  Just the thought of my messing something up, let alone some bureaucracy messing something up, was frightening enough.

 

[ENT Doc]

Raymond Oliver wrote:

This keeps me up at night, also.  As a neurosurgery resident (8 years with a fellowship) and $390k in student loan debt, my entire financial future is relying on PSLF.  Those monthly IBR payments really hurt and I could have been investing that money if I simply put my loans in forbearance through residency.

Click to expand...

I sincerely hope your entire financial future is not relying on PSLF.  I assure you that it is not.  When you graduate as a N/S fellow your take-home pay combined with good spending habits should easily be able to vault you to success, assuming you aren't a late starter.  I would strive to be in a position where if the federales came knockin' in 10 years for a 400k check you'd lawyer up but be able to pay it off no problem.  It won't feel good.  But it shouldn't devastate your financial future.  That's a few years of savings for a N/S attending.

[KidneyBoy]

I was aiming for PSLF. I'm so enraged by the lack of transparency that I may just bite the bullet and refinance/pay down all those loans just to be done with it.

[Raymond Oliver]

ENT Doc wrote:

Raymond Oliver wrote:

This keeps me up at night, also.  As a neurosurgery resident (8 years with a fellowship) and $390k in student loan debt, my entire financial future is relying on PSLF.  Those monthly IBR payments really hurt and I could have been investing that money if I simply put my loans in forbearance through residency.

Click to expand…

I sincerely hope your entire financial future is not relying on PSLF.  I assure you that it is not.  When you graduate as a N/S fellow your take-home pay combined with good spending habits should easily be able to vault you to success, assuming you aren’t a late starter.  I would strive to be in a position where if the federales came knockin’ in 10 years for a 400k check you’d lawyer up but be able to pay it off no problem.  It won’t feel good.  But it shouldn’t devastate your financial future.  That’s a few years of savings for a N/S attending.

Click to expand...

You're right.  I was exaggerating a bit and I do hope to be able to pay that off without PSLF.  Losing PSLF won't devastate me financially.  It's more devastating to write that $400 per month check on a resident salary.  Being able to put that in a roth IRA instead would have been ideal.  That's nearly $40k in lost savings over the course of a residency before any compounded interest.

[bonehead]

A point of clarification:

This has been published before.  If you actually do a bit of research, the plaintiffs don't appear to be from 501c3 organizations.  For example, Jamie Rudert applied for PSLF payments as an employee of the Vietman Veterans of America, which is a 501(c)(19) company.

It is true that the form makes exceptions for work under non 501c3 companies, and it is true that those scenarios appear to be vague per the inclusion language.  But any physician working for a 501c3 entity has a far, far better argument to be included because the language specifically mentions those entities.

[Craigy]

Raymond Oliver wrote:

ENT Doc wrote:

Raymond Oliver wrote:

This keeps me up at night, also.  As a neurosurgery resident (8 years with a fellowship) and $390k in student loan debt, my entire financial future is relying on PSLF.  Those monthly IBR payments really hurt and I could have been investing that money if I simply put my loans in forbearance through residency.

Click to expand…

I sincerely hope your entire financial future is not relying on PSLF.  I assure you that it is not.  When you graduate as a N/S fellow your take-home pay combined with good spending habits should easily be able to vault you to success, assuming you aren’t a late starter.  I would strive to be in a position where if the federales came knockin’ in 10 years for a 400k check you’d lawyer up but be able to pay it off no problem.  It won’t feel good.  But it shouldn’t devastate your financial future.  That’s a few years of savings for a N/S attending.

Click to expand…

You’re right.  I was exaggerating a bit and I do hope to be able to pay that off without PSLF.  Losing PSLF won’t devastate me financially.  It’s more devastating to write that $400 per month check on a resident salary.  Being able to put that in a roth IRA instead would have been ideal.  That’s nearly $40k in lost savings over the course of a residency before any compounded interest.

Click to expand...

A $390k hit is still a big hit.  Most physicians I know would not be able to just write a $400k check.

[nachos31]

bonehead wrote:

A point of clarification:

This has been published before.  If you actually do a bit of research, the plaintiffs don’t appear to be from 501c3 organizations.  For example, Jamie Rudert applied for PSLF payments as an employee of the Vietman Veterans of America, which is a 501(c)(19) company.

It is true that the form makes exceptions for work under non 501c3 companies, and it is true that those scenarios appear to be vague per the inclusion language.  But any physician working for a 501c3 entity has a far, far better argument to be included because the language specifically mentions those entities.

Click to expand...

bonehead, thanks for this clarification. It is an important distinction regarding the various 501 subcategories, as noted:

The Employer Certification Form states, "A qualifying organization is a government organization or a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code (IRC)...A private not-for-profit organization that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying organization if it provides certain specified public services. [my emphasis]"

Like you state, the Dept of Ed would have a hard time not approving a 501(c)(3) employer of physicians since it is explicitly stated.

That being said, the mishap that befell Rudert and the others is still disheartening as is the lack of transparency FedLoan and Dept of Ed in handling the situation.

The plan espoused by WCI and others to have a side taxable fund earmarked for "PSLF falling through" becomes an ever more prudent plan.

[DMFA]

It's a fearmongering article. Rubbish journalism. It is taken way out of proportion and improperly casts doubt on everyone ever based on four non-representative examples. Further, it's just a rehash of a substantially identical article from Dec 2016.

The organizations weren't qualified, in most cases not 501(c)(3), and it should have been fairly clear (advocacy organizations) that they didn't fit under the categories for acceptable non-501(c)(3) nonprofits.

Yes, it's always possible some drone behind a desk did something incorrectly. But when you can clearly read the rules and you clearly, unambiguously fit within them - government orgs in particular - there should be zero uncertainty vis-à-vis eligibility based on employment. The lack of appeal process and retroactive borrower liability are problematic, though, but shouldn't send you into a panic.

Now, as for whether they'll continue the program due to other factors, different story.

I'm sure it got them tons of clicks, though. Traffic = money.

[Joy Sorensen Navarre Navigate]

The backstory:

On December 20, 2016 four attorney borrowers and the American Bar Association filed suit against the U.S. Department of Education, seeking DECLARATORY AND INJUNCTIVE RELIEF. In this type of lawsuit the plaintiffs want a court to compel the Dept of Ed to stop doing something wrong, or to start doing the right thing. It's legal action used to clarify the rules.

On March 23, 2017 the Department filed their response. They denied all the allegations.

It will be interesting to see what the Court decides.

In my conversations with Isaac Bowers, Director, Equal Justice Works, the premier membership organization for public service law, he agrees that the action (rescinding the employment certification approvals) of the Department is concerning. He believes this is an issue for a small number of people. As noted above by DMFA, it does not concern employees of 501(c)(3) organizations.

The official response from the Department of Education and MyFedLoans is: 'Nothing has changed.' We'll see if that changes.

If you'd like to read the legal filings, send me a message. I'll email them to you.