Teachers union sues DeVos over embattled loan relief program

One of the nation's largest teachers' unions sued the U.S. Education Department on Thursday over a federal program that promises to forgive student loans for public workers but has been beset by problems.

The American Federation of Teachers filed a federal lawsuit in Washington, D.C., alleging that the department has mismanaged the Public Service Loan Forgiveness program, violating the Constitution by denying applicants their due process rights.

The program was created in 2007 and promises to forgive student loans for graduates who made 120 monthly payments while working as teachers, nurses, police or other public workers.

But just 1% of more than 86,000 applications had been approved for loan forgiveness as of March 31, according to Education Department data, while thousands were told they had not made enough loan payments or were missing paperwork.

The union says the Education Department routinely makes errors while processing applications and has no appeals process for those who are wronged. The suit targets the department and Secretary Betsy DeVos.

"Public Service Loan Forgiveness is a right, but Betsy DeVos has turned it into a crapshoot," said Randi Weingarten, the president of the union. She added that instead of helping borrowers, DeVos "has hurt and pauperized them."

Department spokeswoman Liz Hill says the agency does not comment on pending litigation but added that the department is "faithfully administering the complex program Congress passed."

Joining the lawsuit are several school teachers and other public workers who say they were denied loan discharges because the department miscounted their loan payments or because their loan servicers gave them inaccurate information.

The suit demands loan discharges for those public workers and says the department should identify other errors it has made and create a new appeals process to fight rejections.

It says the department has "failed to make good on Congress's promise, denying PSLF to applicants on arbitrary and capricious grounds, without any meaningful process to review erroneous decisions."

The program has been in turmoil over the last year amid complaints that its complex eligibility rules were never made clear. The deal applies only to certain federal loans, for example, and only for borrowers in certain repayment plans.

Scores of borrowers have complained that they made 10 years of loan payments in hopes of getting loan forgiveness, only to find out that they aren't eligible because they didn't have the right type of loan or payment plan.

A September 2018 report from the Government Accountability Office found that the department had failed to make the rule clear to borrowers or to the loan servicer that processes applications.

Congress has allotted temporary funding to erase loans for borrowers who were rejected only because they had the wrong type of loan or payment plan, but the union says the department has failed to implement even that stopgap program.

Education Department data show that more than 12,000 applications had been submitted for the temporary funding as of March, but just 3.6% had been approved.

Democrats in Congress have blamed DeVos for failing to fix the program, but she blames Congress for creating a program with complex rules. She has also said she doesn't think certain types of jobs should be incentivized over others.

A group of Senate Democrats proposed a bill in April that would simplify the rules and expand the offer to more borrowers.

Without a fix, advocates worry that the problem will only worsen. While fewer than 100,000 have applied for forgiveness since the application window opened in late 2017, Education Department data show that more than 1 million have taken the initial steps to have their loan payments counted for the program.