Although many military members and Defense Department civilian employees could benefit financially from a 14-year-old federal student loan debt forgiveness program, the benefit is underused and misunderstood, according to a new report from government auditor.

Few have applied so far for the Public Service Loan Forgiveness program, and of those who have, about 94 percent have been denied, according to the report from Government Accountability Office, showing a need for more information about eligibility requirements.

GAO found that many borrowers were confused by the PSLF program requirements. Defense and Education department officials need to work together, and push to get the word out about the program, its benefits, and its eligibility requirements, auditors stated, in order to increase the number who use the benefit successfully.

Its fundamental purpose is a recruiting and retention tool. The PSLF was established in 2007 by Congress to encourage individuals to pursue careers in public service, to include military or civilian careers with DoD. Those with qualifying federal student loans may be eligible for the remaining balance of their loans to be forgiven, if they remain in public service employment for 10 years while making 120 qualifying loan payments, among other requirements. PSLF is administered by the Department 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 members with federal loans who may qualify for the program, according to GAO.

Defense officials don’t widely use the PSLF program for recruitment and retention, despite facing challenges in certain career fields, according to the GAO report. One reason cited is that some DoD officials prefer to use other DoD benefits and incentives that DoD directly controls, for recruitment and retention. Examples are bonuses and DoD’s own student loan repayment program.

Auditors noted that according to the Office of Personnel Management, “DoD is the largest federal provider of student loan repayments, distributing more than $22 million in student loan repayments for 2,775 personnel in calendar year 2018.”

That student loan repayment program is separate from Department of Educations’ Public Service Loan Forgiveness program. Between 2017 and January, 2020, 124 military and 163 DoD civilian personnel were approved for loan forgiveness under the PSLF program, according to GAO.

But DoD has an opportunity to enhance recruitment and retention by putting out the word that the PSLF can be used along with DoD’s student loan repayment program; that it can offer broader benefits compared to DoD’s program alone, and is available at no cost for DoD, the auditors stated.

One benefit for troops and civilians: loan forgiveness benefits under PSLF are not taxed, but DoD’s student loan repayments are taxed.

As of January, 2020, out of 5,467 applications from DoD borrowers, about 94 percent, or 5,180, were denied. Of those denied, 1,410 were military and 3,770 were DoD civilians. The denial rate among military applicants was about 92 percent; and among DoD civilians, about 96 percent.

Student loan forgiveness: Number of DoD personnel approved or denied for Public Service Loan Forgiveness as of January, 2020:

The three most common reasons for denials were: not enough qualifying payments, missing information such as signature on the form, and no eligible loans, GAO found.

In their response to GAO, defense officials said they don’t believe the PSLF is an effective military recruitment tool for most DoD programs, where applicants typically don’t have substantial student loan debt.

And “most military recruits seek immediate monetary bonuses or near-term loan repayment incentives as motivation for joining,” stated DoD’s response, signed by Lernes J. Hebert, acting assistant secretary of defense for manpower and reserve affairs. The effectiveness of the PSLF program as a retention tool “is limited due to the 10 years of payments necessary to qualify for the program’s loan forgiveness benefit,” he stated. Thus, DoD can’t guarantee eligibility for the program.

The program has been helpful in some fields where service members have larger amounts of student loan debt, such as in the Judge Advocate General Corps, the auditors stated. They cite a 2018 Navy JAG Corps survey, where 94 percent of those who responded said that would be more likely to leave the JAG Corps if the PSLF program were eliminated. In a Marine Corps survey, at least 20 of 62 Marine Corps attorneys who responded said they would not have joined the Marine Corps if the PSLF program hadn’t been an option.

Department of Education data shows that about half of active-duty service members with student loans had balances over $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 challenges and tend to default on their student loans at high rates.

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. As of January, 2020, 19,010 service members had requested certification of their employment and their loans. That optional certification helps service members determine if they are meeting basic requirements and are on track for loan forgiveness at the 10 year point.

But many more could be eligible. Education officials, in their response to GAO, stated that as of Feb. 17, there were 178,215 active duty members with federal loans that may be eligible for PSLF; and another 16,195 members had federal loans that could be consolidated into new qualifying loans.

The auditors recommended that DoD take steps to better inform service members about the PSLF program; and that DoD and Education officials work together to share information about the program.

Defense officials noted that since the PSLF is Department of Education program, Education is primarily responsible for disseminating information about it. “DoD efforts focus on education and a general understanding of the PSLF program by ensure personnel know where to seek further information from the Department of Education” regarding details on the application process, Hebert stated.

Education officials have made a number of changes in the program to clarify information, and to give borrowers more information on their progress toward meeting the requirements. Officials are looking at ways to use information from the Department of Defense Servicemember Civil Relief Act database, to supplement or automate the employer certification process; and the two departments are working to provide more information to DoD employees interested in PSLF.

Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.

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