More than 178,000 soldiers could be eligible for this student debt cancellation benefit, according to Watchdog
While many military and civilian Defense Department employees have been able to benefit financially from a federal student debt relief program for 14 years, the benefit is underutilized and poorly understood, according to a new report from the government auditor.
Few have applied for the public service loan forgiveness program to date, and of those who refused, around 94% were refused, according to the Government Accountability Office report, showing the need for more. information on eligibility requirements.
GAO found that many borrowers were confused by the requirements of the PSLF program. Ministry of Defense and Education officials must work together and lobby to publicize the program, its benefits and eligibility requirements, auditors said, in order to increase the number of people using the program. advantage successfully.
Its fundamental objective is a recruitment and retention tool. The PSLF was established in 2007 by Congress to encourage individuals to pursue careers in the public service, to include military or civilian careers with the DoD. Those with eligible federal student loans may be eligible for their loan balance forgiveness if they remain in the public service for 10 years while making 120 eligible loan repayments, among other requirements. The PSLF is administered by the Ministry of Education.
Since September 2017, when the first borrowers became eligible to meet the 10-year public service requirement, more than 5,000 military and DoD civilians have applied. But there are currently more than 178,000 military personnel with federal loans who may qualify for the program, according to GAO.
Defense officials do not widely use the PSLF program for recruitment and retention, despite challenges in some career areas, according to the GAO report. One reason given is that some DoD officials prefer to use other DoD benefits and incentives that DoD directly controls, for recruitment and retention. Examples are the DoD premiums and student loan repayment program.
The auditors noted that, according to the Office of Personnel Management, “The DoD is the largest federal provider of student loan repayments, distributing more than $ 22 million in student loan repayments to 2,775 staff over the course of the year. of calendar year 2018. “
This student loan repayment program is separate from the Department of Education’s public service loan forgiveness program. Between 2017 and January 2020, 124 military and 163 civilian DoD personnel were approved for loan cancellation under the PSLF program, according to GAO.
But the DoD has the opportunity to improve recruitment and retention by announcing that the PSLF can be used with DoD’s student loan repayment program; that it may offer broader benefits over the DoD program alone, and that it is available free for DoD, auditors said.
A benefit for soldiers and civilians: PSLF loan forgiveness allowances are not taxed, but DoD student loan repayments are taxed.
As of January 2020, out of 5,467 DoD borrower applications, approximately 94%, or 5,180, were denied. Of those refused, 1,410 were military personnel and 3,770 DoD civilians. The refusal rate among military applicants was around 92%; and among DoD civilians, about 96%.
Student loan forgiveness: Number of DoD staff approved or denied for public service loan forgiveness in January 2020:
The three most common reasons for refusal were: not enough qualifying payments, missing information such as the signature on the form, and no qualifying loans, GAO found.
In their response to GAO, defense officials said they did not believe the PSLF to be an effective military recruiting tool for most DoD programs, where applicants typically do not have student debt. important.
And “most military recruits look for immediate cash bonuses or incentives to pay off short-term loans as motivation to join,” said the DoD response, signed by Lernes J. Hebert, acting deputy secretary of defense. for labor and reserve affairs. The effectiveness of the PSLF program as a retention tool “is limited due to the 10 years of payments required to qualify for the loan forgiveness benefit of the program,” he said. Therefore, the DoD cannot guarantee eligibility for the program.
The program has been helpful in some areas where service members have greater student loan debts, such as in the Judge Advocate General Corps, the auditors said. They cite a 2018 Marine JAG Corps poll, in which 94% of those who responded said it would be more likely to leave the JAG Corps if the PSLF program was eliminated. In a Marine Corps investigation, at least 20 of 62 Marine Corps lawyers who responded said they would not have joined the Marine Corps if the PSLF program had not been an option.
Data from the Department of Education shows that about half of active duty members with student loans had balances above $ 13,000 as of January 2020, according to GAO. But education officials told GAO that borrowers with small student loan balances can still face repayment issues and tend to default on high-rate student loans.
There are more service members aware of the PSLF program, and in their 10-year pipelines, according to GAO’s analysis of Department of Education data. By January 2020, 19,010 service members had requested proof of their employment and loans. This optional certification helps service members determine if they meet basic requirements and are on track for a 10-year loan forgiveness.
But many more could be eligible. Education officials, in their response to GAO, said as of Feb. 17, 178,215 active-duty members with federal loans could be eligible for the PSLF; and another 16,195 members had federal loans that could be consolidated into new eligible loans.
The auditors recommended that the DoD take steps to better educate service members about the PSLF program; and that Department of Defense and Education officials work together to share information about the program.
Defense officials noted that since the PSLF is a program of the Ministry of Education, Education is primarily responsible for disseminating information about it. “DoD’s efforts are focused on education and a general understanding of the PSLF program by ensuring staff know where to look for additional information from the Department of Education” regarding the details of the application process, Hebert said. .
Education officials have made a number of changes to the program to clarify information and to give borrowers more information on their progress towards meeting requirements. Officials are looking for ways to use information from the Defense Ministry’s Civil Relief Act database to supplement or automate the employer certification process; and both departments are working to provide more information to DoD employees interested in the PSLF.