Public Service Loan Forgiveness

Beginning in 2017, the Public Service Loan Forgiveness (PSLF) program  is to offer loan forgiveness on the remaining Direct Loan balances of  borrowers who complete at least 10 years of qualifying public service  employment and meet other requirements. 1). Using its income tax data and Education’s student loan data,  Treasury estimated that about half (51 percent) of Direct Loan borrowers  were eligible for IBR as of September 2012. An additional 4 percent of these  borrowers participated in ICR (see fig. 2). 3). In addition, substantially lower percentages of IBR and PAYE participants  had defaulted on their loan compared to those in Standard repayment,  and the great majority were in active repayment as of September 2014. Education Has Not Consistently Provided Information on Income- Driven Repayment Plans to Borrowers

Education has taken steps intended to increase borrower awareness of  income-driven repayment plans, including IBR and PAYE, but has not  consistently provided information about these plans to borrowers who  have entered repayment. Few Borrowers Who May Be Employed in Public Service Have Had Their Employment and Loans Certified for PSLF, and Education Has Not Assessed Its Efforts to Increase Awareness about PSLF

		About 147,000 Borrowers Had Employment and Loans Certified in Anticipation of PSLF, and 4 Million Borrowers May Be Employed in Public Service

			Certification of Employment and Loans

While information on PSLF participation will not be available until  borrowers can begin applying for loan forgiveness in October 2017, about  147,000 borrowers have had their employment and loans certified for  PSLF as of September 2014, according to data from Education’s loan  servicer for the program. Furthermore, if  rates of public service employment are comparable among Direct Loan  borrowers across repayment plans, about 643,000 Direct Loan borrowers  repaying their loans through IBR, PAYE, and ICR as of September 2014  may be employed in public service. Education Has Not Assessed Its Efforts to Increase Awareness of PSLF

Education has taken some steps intended to increase borrower  awareness of PSLF, but it has not notified all borrowers who have  entered repayment about the program. However, Education has not examined borrower awareness of PSLF to  determine how well these efforts are working. Such efforts would  support Education’s goal to provide superior information and service to  borrowers. Borrowers who have entered repayment and have not been  notified about the program may be making decisions without complete  information and might miss the opportunity to benefit from the program  when it becomes available in 2017. Borrowers also need sufficient and timely information about Public  Service Loan Forgiveness. As a result, borrowers  employed in public service for at least 10 years may miss opportunities to  benefit from the program when it becomes available in 2017, potentially  forgoing thousands of dollars in loan forgiveness. Recommendations for Executive Action

To help ensure that Income-Based Repayment, Pay As You Earn, and  Public Service Loan Forgiveness serve their intended beneficiaries to the  greatest extent possible, we recommend that the Secretary of Education:  take steps to consistently and regularly notify all borrowers who have  entered repayment of income-driven repayment plan options,  including Income-Based Repayment and Pay As You Earn. Beyond our  recommendations, Education expressed concern that the draft report  overstated the extent to which borrowers lack awareness of income- driven repayment plans. GAO staff who made key contributions to this  report are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

This appendix discusses in detail our methodology for addressing two  research questions for the Direct Loan program: (1) How does borrower  participation in Income-Based Repayment (IBR) and Pay As You Earn  (PAYE) compare to available estimates of eligibility, and to what extent  has the Department of Education (Education) taken steps to increase  borrower awareness of these plans? and (2) What is known about Public  Service Loan Forgiveness (PSLF) certification and eligibility, and to what  extent has Education taken steps to increase awareness of this program? We reviewed relevant federal laws, regulations, and  documentation from Education. To approximate the percentage of Direct Loan borrowers who may be  eligible for PSLF, we used 2012 Bureau of Labor Statistics data—the  most recent available. Interviews

To examine IBR and PAYE participation and eligibility, PSLF certification  and eligibility, and determine the extent to which Education has taken  steps to raise awareness of the programs, we interviewed officials from  Education, Treasury, and the Bureau of Labor Statistics.
Why GAO Did This Study

As of September 2014, outstanding federal student loan debt exceeded $1 trillion, and about 14 percent of borrowers had defaulted on their loans within 3 years of entering repayment, according to Education data. GAO was asked to review options intended to help borrowers repay their loans.
For Direct Loan borrowers GAO examined: (1) how participation in Income-Based Repayment and Pay As You Earn compares to eligibility, and to what extent Education has taken steps to increase awareness of these plans, and (2) what is known about Public Service Loan Forgiveness certification and eligibility, and to what extent Education has taken steps to increase awareness of this program. GAO reviewed relevant federal laws, regulations, and guidance; September 2014 data from Education and its loan servicer for Public Service Loan Forgiveness; Treasury's eligibility estimates; and 2012 employment data (most recent available) from the Bureau of Labor Statistics. GAO also interviewed officials from three loan servicers that service about half of Education's loan recipients.

What GAO Found

Many eligible borrowers do not participate in the Department of Education's (Education) Income-Based Repayment and Pay As You Earn repayment plans for Direct Loans, and Education has not provided information about the plans to all borrowers in repayment. These plans provide eligible borrowers with lower payments based on income and set timelines for forgiveness of any remaining loan balances. While the Department of the Treasury estimated that 51 percent of Direct Loan borrowers were eligible for Income-Based Repayment as of September 2012, the most recent available estimate, Education data show 13 percent were participating as of September 2014. An additional 2 percent were in Pay As You Earn. Moreover, Education has reported ongoing concerns regarding borrowers' awareness of these plans. Although Education has a strategic goal to provide superior information and service to borrowers, the agency has not consistently notified borrowers who have entered repayment about the plans. As a result, borrowers who could benefit from the plans may miss the chance to lower their payments and reduce the risk of defaulting on their loans.
Few borrowers who may be employed in public service have had their employment and loans certified for the Public Service Loan Forgiveness program, and Education has not assessed its efforts to increase borrower awareness. Beginning in 2017, the program is to forgive remaining Direct Loan balances of eligible borrowers employed in public service for at least 10 years. As of September 2014, Education's loan servicer for the program had certified employment and loans for fewer than 150,000 borrowers; however, borrowers may wait until 2017 to request certification. While the number of borrowers eligible for the program is unknown, if borrowers are employed in public service at a rate comparable to the U.S. workforce, about 4 million may be employed in public service. It is unclear whether borrowers who may be eligible for the program are aware of it. Although Education has a strategic goal to provide superior information and service to borrowers and provides information about Public Service Loan Forgiveness through its website and other means, it has not notified all borrowers in repayment about the program. In addition, Education has not examined borrower awareness of the program to determine how well its efforts are working. Borrowers who have not been notified about Public Service Loan Forgiveness may not benefit from the program when it becomes available in 2017, potentially forgoing thousands of dollars in loan forgiveness.

What GAO Recommends

GAO recommends Education consistently notify borrowers in repayment about income-driven repayment, and examine borrower awareness of Public Service Loan Forgiveness. Education generally agreed with GAO's recommendations, but it believed the report overstated the extent to which borrowers lack awareness of income-driven repayment. GAO modified the report to clarify this issue.