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Public Service Loan Forgiveness Lawsuits And Doubts From Borrowers.


As you may already know from different news media outlets the Department of Education and FedLoan are being sued by teachers alleging that the student loan forgiveness program violates federal law and the Constitution.

Roughly 33 million borrowers qualify for public service loan forgiveness but 98 percent of applications are being rejected and only 1 percent will receive any of its benefits. Why is this? Most of the time is because borrowers filled the public service loan forgiveness form with incorrect information or their loans are not qualifying loans.

Here’s what we know.

Public Service Loan Forgiveness Lawsuits Information

The monopoly started when the Department of Education assigned a private company FedLoan Servicing to handle all payments and servicing of the public service loan forgiveness program.

If you needed to track any progress in this program the loans get transfer to FedLoans because of the rights granted by the Department of Education. Later for a few years, FedLoan sent out info to borrowers saying that they were eligible for the pslf program that actually weren’t eligible.

After this event, a big group of lawyers and teachers were told that they were on track for student loan forgiveness when in fact they were not. This obviously made borrowers really angry, and now they are taking it to court.

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The group of borrowers that are included in the pslf lawsuit are mostly lawyers, teachers, Vietnam Veterans of America (VVA) and those who spent a couple of years or more working thinking they were on track to loan forgiveness based on FedLoan promises.

Public Service Loan Forgiveness Qualifications

To begin in this program you must be employed by a qualifying employer. What makes a qualifying employer? any employment by the government, employment by a not-for-profit organization that is tax-exempt under Section 501(c)(3) of the Internal Revenue Code, AmeriCorps position, a Peace Corps position, or employment at a public service organization.

Second, you must make qualifying payments based on your income on Direct loans for 10 years while employed at this qualifying employer.

The first issue with the borrower’s eligibility in the lawsuit. The American Bar Association is an industry-specific membership organization that’s governed by Section 501(c)(6) of the IRS Code. That status means that the ABA is a ‘business league’ that’s allowed to engage in ‘unlimited lobbying’ for the economic benefit of its members. So the only way the ABA is a qualifying employer is if they’re considered a public service organization.

The second issue with the borrower’s eligibility in the lawsuit. The Vietnam Veterans of America organization is a 501(c)(19) under the IRS Code. The only way that employment qualifies for PSLF is if the VVA is a public service organization.

The Third issue with the borrower’s eligibility in the lawsuit. Teachers were told by FedLoan customer service reps that they on track for loan forgiveness, later told that they were on the wrong program because the loans did not qualify. And also not keeping track of the number of qualifying payments people make.

Only the following types of loan qualify for PSLF:

  • Direct Subsidized / Unsubsidized
  • Direct Consolidated Loans
  • Direct PLUS
  • Direct Stafford Subsidized / Unsubsidized

Public Service Loan Forgiveness Qualifying Employment

If you work for a private non-profit employer that is not a tax-exempt organization under Section 501(c)(3) of the IRC may be a qualifying public service organization if it provides certain specified public services. These services include:

  • Emergency management
  • Military service
  • Public safety, or law enforcement services
  • Public health services, public education or public library services
  • School library and other school-based services
  • Public interest law services
  • Early childhood education
  • Public service for individuals with disabilities and the elderly

Don’t worry about the PSLF Lawsuit

You shouldn’t worry about the lawsuit if you are seeking public service loan forgiveness, and you are completely sure you are at a 501(c)(3) or a government employer. The majority of people going for PSLF are at qualifying organizations and are will not be affected by this PSLF lawsuit.