The Feds May Not Forgive Your Student Loan Debt After All

The federal government has suddenly announced it may revoke the eligibility of some workers in a decade-old student debt forgiveness program. The decision comes just as the first class is about to fulfill their commitment, and throws more than half a million public service workers into uncertainty over massive financial obligations they had been promised would be fulfilled.

Serve the Public, Have Your Student Loans Forgiven?

In 2007, as part of a bill to overhaul federal student loans, Congress approved a program that would repay the remaining student loan debts of those who worked in a public service job for 10 years and made regular payments on their federal loans (private loans don't qualify) during that time. Over 500,000 people took advantage of the program, although the Consumer Financial Protection Bureau estimates that as much as 25% of the nation's workforce would likely qualify.

As the program's initial participants near the 10-year mark in October, uncertainty looms. The New York Times recently reported that four lawyers have filed a suit against the Education Department to have their eligibility for the program restored. The plaintiffs contend that they initially received notice that they qualified for the program, only to be told years later they were no longer eligible, even though they were still working the same jobs and had made regular loan payments.

The lawyers work for such organizations as the Vietnam Veterans of America and the American Immigration Lawyers Association, where their salaries are much lower than if they had chosen to work in the private sector. Obviously, there are many decisions they might have made differently had they known that their loans wouldn't be paid off as promised.

Gov Now Says Eligibility Decisions Were "Not Binding"

Meanwhile, the Education Department made a legal filing in response to the suit stating that the approval letters sent by the program's administrator, FedLoan Servicing, are not binding and can be rescinded at any time. Both FedLoan and the Department declined to talk to the Times.

With the suit still to be decided and the first repayments to be made, anything could still happen at this point. But the Education Department's lack of transparency is certainly making some 500,000 people very nervous.

What do you think readers? Are you or someone you know counting on this program to repay your student loans? Let us know in the comments.