Public servants seeking student-loan forgiveness have long faced a 'bureaucratic nightmare' — and 2 Democratic senators have a plan to fix it

• Sens. Sheldon Whitehouse and Jeff Merkley introduced a bill to fix a student-loan forgiveness program.
• It would simplify Public Service Loan Forgiveness by reducing the number of qualifying payments.
• The program has been flawed for years, blocking borrowers out of relief they deserved.

A student-loan forgiveness program for public servants such as teachers, military, and firefighters has been plagued with flaws that have blocked deserving borrowers from relief — and two Democratic senators say they have a plan to fix it. 

On Wednesday, Sens. Sheldon Whitehouse of Rhode Island and Jeff Merkley of Oregon introduced a bill first seen by Insider, called Simplifying and Strengthening PSLF Act, to improve the Public Service Loan Forgiveness (PSLF) program which was created in 2007 to give public servants, like nonprofit workers and teachers, student debt relief after ten years of repayment.

While President Joe Biden implemented reforms to the program last year to make it easier for borrowers to qualify for the program, 98% of those who applied for the program had previously been denied, warranting further reform.

"The Public Service Loan Forgiveness program promised loan relief to Americans willing to pursue a career in public service. Instead, they landed in a bureaucratic nightmare with no loan forgiveness in sight," Whitehouse said in a statement. "This bill would build on the Biden administration's important fixes made last fall, and to draw more bright young people to work for the public good."

In October, Biden announced a waiver that runs through October 31, 2022, that allows borrowers to count payments from any federal-loan programs or repayment plans toward loan forgiveness through PSLF, including programs and plans that were not previously eligible. The senators' bill would build on those changes. Specifically, the bill would:

• Reduce the number of qualifying PSLF payments from 120 payments over ten years to 60 payments over five years;
• Allow any prior student-loan payment to qualify toward forgiveness progress;
• Ensure active duty service members who deferred payments while serving can qualify;
• And allow any borrowers with parent PLUS loans, along with couples who consolidated their FFEL loans into a single payment, to re-consolidate their loans into a direct loan to qualify for PSLF.

Should this bill be signed into law, it would be instrumental for married couples who were advised to combine their student debt balances. Congress shuttered the spousal joint loan consolidation program in 2006, which allowed married couples to combine their student-debt loads into one loan, allowing them to make just a single monthly payment with one interest rate. But law prohibited those couples from separating their loans, even at divorce, meaning that unless the law changed, they would never be able to qualify for PSLF.

Insider previously spoke to two married couples — both public servants — who are hoping Congress will pass a law that will allow them to separate their student loans and get the relief they thought they were promised. 

"I understand people need to pay back their debt. I get that part," one borrower with spousal loans said. "But if the government promises debt forgiveness for public servants after ten years, and we find out after the fact our loans don't qualify, that's my biggest problem."

So far, over 100,000 student-loan borrowers have qualified for PSLF due to the Education Department's reforms. And while Biden is coming closer to making a decision on broad student-loan forgiveness — recent reports have suggested he is considering $10,000 in relief — many public servants are continuing to wait for their loan forgiveness program to deliver long-awaited relief.

"Public service already often comes at a financial sacrifice, and it's even tougher to manage if you're carrying huge student loans," Merkley said in a statement. "This bill to simplify and strengthen the PSLF program will ensure careers in public service are accessible to everyone striving to do this important work and find a pathway to a stable economic future for themselves and their families."