A dozen Democratic senators introduced a bill on Thursday to overhaul the popular but challenged Public Service Loan Forgiveness Program.
In 2013, the Consumer Financial Protection Bureau estimated that one-quarter of American workers could be eligible. However, the program has been plagued by problems. The bureau has since found that student loan servicers delay or deny borrowers access to the program by failing to provide them with accurate and complete information about its requirements.
As a result, many people in public service jobs believe that they’re paying their way to loan forgiveness only to discover at some point in the process that they don’t qualify for one technical reason or another. Often, their loan type or repayment plan was ineligible.
The Education Department recently released data on how many borrowers’ loans it has forgiven under the program — just 206. More than 41,000 people have applied.
The new legislation would make all federal loans eligible for the program. Under the current law, borrowers in the Federal Family and Education Loan (FFEL) Program do not qualify.
In addition, all federal repayment plans would be eligible for the relief. There are some 14 ways to repay your student loans, but to qualify for public service loan forgiveness you currently need to be enrolled in one of the four income-based programs.
The legislation also would require the Education Department to provide borrowers with better information about the program and to simplify the application process.
One of the most notable changes: Borrowers would no longer have to wait a decade to get relief on their loans. They could have half of their loans forgiven after five years.
That shorter timeline could bring more people into public service work, said Mark Kantrowitz, a student loan expert.
“People who might not be willing to commit to something for 10 years might nevertheless be willing to commit for five years,” Kantrowitz said.
The overhaul may have an immediate cost of between $2 billion and $3 billion, and could increase the program’s budget by more than $10 billion over the next decade, according to Kantrowitz.
More from Personal Finance:
What you need to qualify for public service loan forgiveness
Government may forgive student loans if you meet demands
Education Dept. fails on public service loan forgiveness: Senators