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Education Department rejected 99% of applicants for student loan forgiveness program

The U.S. Education Department rejected 99 percent of applicants in the first 12 months of a revamped student loan forgiveness program, according to government watchdog report released Thursday. Ironically, the program had been expanded last year to help students who were already struggling to qualify for loan forgiveness.

The report by the Government Accountability Office says there were 54,184 completed applications between May 2018 and May 2019 for the Temporary Expanded Public Service Loan Forgiveness Program (TEPSLF). Out of those, 53,523 were denied and only 661 were approved.

Congress expanded the program in 2018 to help students who were having trouble securing loan forgiveness through the Public Service Loan Forgiveness (PSLF), a program created in 2007 to forgive federal loans for students who works in certain public service jobs for at least 10 years while making payments. Congress set aside $700 million for the program's extension — and just $27 million of that has been used.

The temporary forgiveness program was intended to help borrowers who were on repayment plans that were ineligible with the original PSLF program.

But the Government Accountability Office report says the Education Department's process for this is "confusing" and "not clear to borrowers," leading to the mass rejections.

According to the report, some of the Education Department's key online resources for borrowers don't include information on the expanded program, and the agency doesn't require federal loan servicers to include that information on their websites, either. 

The reports says the new process also added new layers of bureaucratic confusion. Most borrowers did not understand that they had to apply for the original program — even if they were already ineligible for it — to be considered for expanded program. Most of the rejected applications — 71% — were turned down because the borrower did not apply for the original PSLF program. 

The report says this process "can be confusing for borrowers" and "is not aligned with Education's strategic goal to improve customer service to borrowers."

"As a result, some eligible borrowers may miss the opportunity to have their loans forgiven," it says.

The government watchdog suggests that the Education Department simplify the application process, provide more information about it online and require all federal loan servicers to do the same. 

The report says Education Department officials said they will implement a new online portal for borrowers this fall. The officials also said they could include a simplified application process "if they had sufficient resources and time, but that there were currently no specific plans to do so."

The American Federation of Teachers sued U.S. Education Secretary Betsy DeVos in July over the department's handling of its student loan forgiveness program. The lawsuit said the Education Department rejected applicants "on arbitrary and capricious grounds," and that DeVos had "hurt and pauperized" millions of Americans looking for debt relief. 

The Education Department did not immediately comment to CBS News. 

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