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CNBC
a day ago
- Business
- CNBC
46-year-old woman is weeks away from student loan forgiveness but stuck in Trump-era backlog
Under the Trump administration, more than 72,000 student loan borrowers who are likely eligible for debt forgiveness are stuck in a backlog of applications waiting for the relief. Some of them, like 46-year-old April Osteen, owe just a single payment. Others, like Dan Carrigg of Rhode Island, have been waiting a year for the government to respond to their application. "There are no updates," Carrigg said. "They tell you nothing." The program experiencing the challenges is known as Public Service Loan Forgiveness Buyback. That opportunity, first offered by the Biden administration, allows borrowers who qualify to have their debt excused under PSLF to retroactively pay the U.S. Department of Education — or "buy back" — any months they missed because they were enrolled in a forbearance or deferment. (Those are different periods during which borrowers' loan payments are on hold.) PSLF, which President George W. Bush signed into law in 2007, allows certain not-for-profit and government employees to have their federal student loans canceled after 120 payments, or 10 years. The Buyback program became especially popular after courts blocked the Biden-era Saving on a Valuable Education, or SAVE, plan in the summer of 2024. Millions of student loan borrowers who signed up for SAVE were automatically enrolled in a forbearance. Those borrowers found their progress towards PSLF frozen throughout the SAVE payment pause, even as they continued to work in eligible public service. The latest court filing shows 72,730 PSLF buyback requests were pending with the U.S. Department of Education as of the end of July. The bottleneck has only worsened since June, when 65,448 applications were under review by the Trump administration. In May, the backlog was close to 59,000. (The Education Dept. has regularly shared the data on pending buyback requests as part of a lawsuit the American Federation of Teachers filed against it. The teacher's union alleges the agency is blocking borrowers from their rights.) "The Biden Administration introduced the Public Service Loan Forgiveness buy-back program to allow borrowers to 'buy' eligibility into the program — weaponizing a legal discharge plan for political purposes," said Ellen Keast, deputy press secretary at the Education Department. "The Department is working its way through this backlog while ensuring that borrowers have submitted the required 120 payments of qualifying employment," Keast said. CNBC spoke with three of the borrowers in the buyback backlog about how the delayed loan cancellation is affecting them. "Long delays in PSLF buyback processing must be corrected immediately so that public service workers who have provided essential local services are not deprived of the relief they've earned," said Jaylon Herbin, director of federal campaigns at the Center for Responsible Lending. Osteen, an administrative coordinator at the University of South Carolina, submitted her buyback request in January. Nearly seven months later, she still hasn't received an answer from the Education Department. The government has recorded that she's made 119 out of the 120 required qualifying payments for PSLF — and so she's trying to buy back just one monthly payment to get her debt cleared. Her momentum toward the relief was stalled during the SAVE issues. "I reached out repeatedly to both my loan servicer and the Department of Education, practically begging for help," said Osteen. "At one point, I remember telling a representative, 'I just want to pay—please let me pay!'" "How could I be one payment away from loan forgiveness, only to be told I couldn't make that final payment?" she said. More from Personal Finance:Trump floats tariff 'rebate' for consumersStudent loan forgiveness may soon be taxed againStudent loan borrowers — how will the end of the SAVE plan impact you? Tell us Osteen's roughly $26,000 remaining student loan balance prevents her from taking on new expenses, even for urgent repairs needed on her house in Simpsonville, South Carolina. "I need to address issues like diseased Sycamore trees that pose a safety risk, a collapsing wooden fence and serious drainage problems in the backyard and driveway," she said. Her monthly student loan payments of up to around $350 have made it difficult to save throughout her career. Without much in savings, she considered taking out a personal loan to pay for the work on her house. But then she thought of her education debt. "I'm hesitant to take on a new monthly payment while I still owe student debt — debt that should have already been discharged under the PSLF program," Osteen said. "This uncertainty continues to shape every financial decision I make." Josh Harner, a teacher at a prison in Illinois, has been waiting for a response from the Education Department to his buyback request since early December — more than eight months ago. His loan account shows that he's made 117 qualifying monthly PSLF payments, though he says he's worked far longer in the public sector. During his over-decade-long career, Harner has helped more than 250 people earn their GED credential, a high school diploma equivalent, he said. And so he said it's frustrating to be waiting so long for loan forgiveness. His remaining balance is a little over $120,000. "I check my email 10 times a day," Harner, 38, said, about his buyback request. "I have taken every step — countless phone calls, emails, complaints," he said. "The federal government can't handle the management of all these loans." The main reason Harner wants his debt erased, he said, is so that he can save more for his 15-year-old son's upcoming college bills, and hopefully spare him from the stresses of student loans. "It will feel much better saving the money toward my son's education," Harner said. "I didn't want him to have to worry about how to pay for college or getting into debt to do it." Carrigg, an associate teaching professor at the University of Rhode Island, submitted his buyback request a year ago, in Aug. 2024. He's listed as having made 108 out of the 120 qualifying payments. "I have considerably more than 10 years [of] certified employment," said Carrigg, 41. Carrigg has contacted his local lawmakers and his state attorney general about the issue, but has had no success. "I still call Federal Student Aid every week or two," he said. "I don't know what else to do." He has been unable to get his remaining roughly $15,000 student debt excused. "I am trying to pay Uncle Sam and taxpayers a lump sum of money to complete and finish off my loan, but I cannot get FSA [Federal Student Aid] to provide me with the offer letter that states how much I should make the check out for." "And without that, I cannot pay them," he said. "It is maddening." Throughout his life, Carrigg said, he's needed to make a number of sacrifices because of his student debt. He's taken on a second teaching job at night, and forgoes many discretionary purchases. "We don't take vacations every year," he said. With his student debt forgiven, he and his wife would be able to direct more money toward their mortgage with the goal of no longer having a housing payment in their later decades. "We're not so young anymore," Carrigg said. "And we can start saving a bit more for retirement, which is now coming up faster and faster," he said. "We're getting closer to Medicare age than student loan age."
Miami Herald
25-03-2025
- Business
- Miami Herald
Trump order throws income-driven student loan repayment into upheaval. What to know
Uncertainty is high for millions of federal student loan borrowers wondering how their payment plans will be impacted amid disruptions in the Department of Education after President Donald Trump's executive order crafted an effort to dismantle the department. Some borrowers on income-driven repayment plans have reported that they are unable to recertify their income because the form is no longer available to them online, a necessary step to remain on the plan. These plans base monthly payments off of a borrower's income and family size. In one case, an attorney in Texas said her student loan payments more than quadrupled without warning after she was automatically placed on a 10-year standard repayment plan after missing the deadline to recertify her income. 'The Trump administration took the form for selecting an income-driven repayment plan offline after the appeals court enjoined the program,' student financial aid expert Mark Kantrowitz told McClatchy News. A court injunction blocked the implementation of the Biden-era Saving on a Valuable Education (SAVE) Plan, but also called into question other parts of income-driven repayment plans, according to the Office of Federal Student Aid. Amid reports of the missing, yet necessary form, the Office of Federal Student Aid extended the deadline to recertify income and family size to at least February 2026. However, the announcement said, 'please allow a few weeks for this extension to occur. We will notify borrowers when this is complete.' How were income-driven repayment plans created? Federal student loans were first offered in 1958 under passage of the National Defense Education Act. Seven years later, the Higher Education Act of 1965 established federal aid for lower income students, but subsequently allowed banks and private institutions to hand out government-subsidized student loans, according to Congressional Research Service. The Student Loan Reform Act, which amended the 1965 statute, within the Omnibus Budget Reconciliation Act in 1993 was signed into law by President Bill Clinton. This law set lower interest rates for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans beginning July 1, 1994, according to the bill, and created a variety of repayment options. 'Income contingent' repayment plans were part of this bill. These plans base a monthly student loan payment off of a borrower's income and family size, according to the Office of Federal Student Aid. At the end of the plan's established repayment period, remaining balances can be forgiven in some cases. Over the last three decades, there have been a variety of income-driven repayment plans offered by the Department of Education. Today, four are available, though the Saving on a Valuable Education (SAVE) Plan remains in a federal court battle. Can Trump dismantle income-based repayment plans? Education experts say Trump cannot use an executive order to dismantle parts of the Department of Education that were established through a congressional act. 'Dissolving the U.S. Department of Education would require an act of Congress. The FAFSA, student loans and the Federal Pell Grant are specified in statute, so President Trump cannot eliminate them or the U.S. Department of Education through an executive order,' Kantrowitz told McClatchy News in a February email. In general, executive orders cannot nullify federal laws or rights granted in the constitution, Texas Christian University criminal justice professor Michele Meitl said in a Q&A. In the March 20 executive order, Trump called on Secretary of Education Linda McMahon to 'take all necessary steps to facilitate the closure of the Department of Education.' The request asked the Secretary to take action to the 'maximum extent appropriate and permitted by law.' Since then, multiple lawsuits have been filed in an effort to stop the dismantling of the department without the approval of Congress, the New York Times reported. Trump announced that the student loan system orchestrated by the federal government will shift from the Department of Education to the Small Business Administration, Forbes reported. However, Kantrowitz said that this move still requires an act of Congress.
