Update: Many student borrowers have responded to this story by sharing stories of their struggles with PSLF. We've curated many of them here.
On the morning of Monday, Aug. 27, Seth Frotman told his two young daughters that he would likely be home early that day and could take them to the playground. They cheered.
He did not tell them why their dad, who often worked long hours as the student loan watchdog at the federal Consumer Financial Protection Bureau, would be free for an afternoon play date.
Frotman assumed that after walking into his office and, at precisely 9:30 a.m., hitting "send" on an incendiary resignation letter to lawmakers accusing the Trump administration of betraying student borrowers, he would promptly be walked out with his things, and his career, in a cardboard box.
"Unfortunately, under your leadership," Frotman wrote to his boss, Mick Mulvaney, "the Bureau has abandoned the very consumers it is tasked by Congress with protecting. Instead, you have used the Bureau to serve the wishes of the most powerful financial companies in America."
Frotman arrived at this conclusion, in part, after he and his team reviewed thousands of borrower complaints the previous summer. One program kept coming up, hurting and infuriating the very people it was meant to help: the U.S. government's effort to reward student borrowers for public service — for being nurses, teachers and first responders.
This is the story of Seth Frotman, the mangling of the program known as Public Service Loan Forgiveness, and what it says about America's student loan industry.
Congress created Public Service Loan Forgiveness (PSLF) in 2007, in the waning days of the Bush administration. The pitch to borrowers was simple:
Spend 10 years teaching, nursing, policing or otherwise working for a qualified nonprofit while also making 120 monthly payments against your student loans, and the government would forgive whatever's left. As a thank you.
But recent data from the Department of Education show that 99 percent of applications for loan forgiveness have been denied.
The pitch may have been simple, but the execution was anything but.
Today, the U.S. Department of Education is, essentially, a trillion-dollar bank, serving more than 40 million student borrowers. While the government writes these student loans, it simply cannot run the call centers or handle the paperwork for so many borrowers. It needs help. So it pays companies — the department has contracts with nine of them — to handle customer service. These servicers, as they're known, are glorified record-keepers and debt collectors. But they're also powerful gatekeepers.
And these servicers, Frotman found, with a big assist from the Education Department, were wreaking havoc with the Public Service Loan Forgiveness program.
Staying on track while giving back
In Greek mythology, Cassandra is the daughter of King Priam of Troy and is both blessed and cursed.
Her blessing: She can see into the future and knows, beyond a doubt, that her city's undoing awaits inside a wooden horse.
Her curse: No one believes her.
Seth Frotman is the Cassandra of the student loan industry.
Frotman served three years as the CFPB's student loan ombudsman and head of its Office for Students and Young Consumers. A fierce watchdog for student borrowers, Frotman and his team reviewed thousands of complaints about the questionable practices of student loan companies.
Since 2011, the CFPB has handled more than 60,000 student loan complaints and, through its investigations and enforcement actions, returned more than $750 million to aggrieved borrowers.
In the spring of 2017, Frotman and his team investigated thousands of complaints about a range of issues and found a disturbing pattern with PSLF:
Borrowers would notify their loan servicers of their intent to enroll in the program, then make it years into the repayment process before being told they didn't yet qualify — because they had the wrong loan, the wrong repayment plan or the wrong employer.
Sometimes servicers would be aware of a borrower's status as a public servant — active-duty military, for example — but not tell the borrower about the possibility of PSLF. For borrowers who needed to consolidate their loans to qualify for forgiveness, Frotman found, a process that should have taken 30 days often took much longer. Servicer employees appeared undertrained, uninformed and prone to a litany of paperwork mistakes.
"I thought, 'Oh great, I must qualify for this program,' " says Sarah Krainin, who used loans to pay for college and a master's degree and now teaches at a nonprofit, public university in California. "And I asked my servicer at the time, 'Am I gonna qualify for [PSLF]?' And they said, 'Yes, you have federal loans. You qualify.' "
Krainin says she made life choices that were informed, at least in part, by that promise. But after making six years of payments, she recently checked in with the Education Department and was told she did not qualify, yet.
Krainin was told she could consolidate her loans and qualify for PSLF, but doing so would reset her countdown to loan forgiveness from four years back to 10.
"I've spent six years thinking one thing, and now it's another," Krainin says.
She was devastated and pleaded for leniency with a series of call-center representatives, but got nowhere.
At last, with one call-center agent, Krainin says, "I kinda let my guard down and said, 'This kinda sucks.' And [the representative] said, 'Yeah, it really sucks.' Just hearing her say that was a relief. It wasn't six-years-worth-of-work relief, but it was a little bit of confirmation that this is not really the way things are supposed to be."
In June 2017, Frotman published the results of his CFPB investigation, titled "Staying On Track While Giving Back," and he recommended that policymakers consider immediate changes, including raising standards for servicers and giving more flexibility to borrowers who have been misled by their servicers.
Frotman was not the first Cassandra to warn the Education Department and lawmakers about the program, but his voice may have been the loudest and his case the most thorough. Still, his recommendations fell largely on deaf ears.
The lucky 1 percent
Later that year, in October 2017, after a host of warnings and red flags, the floodgates opened, and the first generation of borrowers to complete 10 years of public service began applying for loan forgiveness. Thousands of them.
It has now been a year, and one thing is clear: Frotman was right.
The Department of Education and the Government Accountability Office (GAO) have both released reviews of PSLF that back up Frotman's CFPB findings.
The department's recent report card for PSLF, the program's first, was a revelation, describing a scale of dysfunction that surprised many in the loan industry. It found that, over the past year, nearly 29,000 applications for Public Service Loan Forgiveness were submitted and processed. Of those, 99 percent were denied, the vast majority for "not meeting program requirements."
Just days after the Education Department released its data, the federal government's independent watchdog weighed in with the results of its own investigation. Investigators from the GAO found that, more than a decade into the program, many borrowers and servicers still appear confused about basic requirements.
Like Frotman's team, GAO found evidence of student borrowers thinking they were on the path to loan forgiveness, only to "find out months and potentially years later that [they] don't qualify and that [they're] not actually eligible for forgiveness," says GAO's Melissa Emrey-Arras, who led the investigation.
Some borrowers had the wrong loans or employers that didn't qualify. Others were in the wrong repayment plan. In fact, more than half of borrowers who asked to have their loans and employment double-checked, to be sure they qualified for PSLF, "either did not meet basic eligibility requirements or had yet to make any qualifying loan payments," according to the report.
GAO's investigation found a communication breakdown between the Education Department and FedLoan, the contractor that officially handles PSLF. For example, if a borrower calls and asks if her job qualifies as public service, the company's representatives told investigators they generally won't answer that question over the phone — because they have no list of eligible employers.
"When the servicer that's responsible for implementing the program doesn't have a list of employers, that's difficult to understand," Emrey-Arras says, making clear that the Education Department deserves as much blame, if not more, for such failures.
"I'd say it's everybody's fault," says Robert Kelchen, assistant professor of higher education at Seton Hall University. "I'd put more of the blame on the Department of Education, because student loan servicers can only really do what the department tells them to do."
Kelchen says one big reason the program's initial rejection rate is so high is because, especially in the early days, PSLF's basic requirements were vague.
"Servicers didn't really have much better information than borrowers," Kelchen says. "They were trying to help students, but they were just using their best guess and trying to go through all of the different emails that the Department of Education would send to servicers instead of actually putting together a guidebook to help them out."
In its defense, the Education Department says it "is approving every eligible application for PSLF under the strict rules that Congress established ... The Department concurs with the [GAO's] recommendations and is committed to enhancing the process, outreach, and communications related to the program. We will soon implement and promote a new, automated 'help tool' for borrowers and will increase communications to make borrowers aware of the tool and other resources related to loan forgiveness programs."
But this communication breakdown is only part of the PSLF problem. Yes, servicers and their call-center agents are often uninformed and unhelpful. But it's also clear, servicers sometimes fail borrowers, intentionally.
"They're doing a terrible job"
While at the CFPB, Frotman and his team found a broad pattern of servicer mistakes and mismanagement. Just days before Donald Trump's inauguration, the bureau sued one of the nation's largest servicers, Navient, alleging the company "provided bad information in writing and over the phone [to borrowers], processed payments incorrectly, and failed to act when borrowers complained about problems."
At the time, Navient was managing more than 6 million student loan accounts for the federal government. Since then, five state attorneys general have also filed suit: Illinois, Washington, Pennsylvania, California and Mississippi.
Navient declined to comment for this story, but its CEO, Jack Remondi, offered this spirited rebuttal when California announced its lawsuit:
The allegations are unfounded, and the lawsuit is another attempt to blame a single servicer for the failures of the higher education system and the federal student loan program to deliver desired outcomes.
Remondi went on to remind Navient's critics that the government's student loan servicers do not "make, own or have a financial interest in the loans" they manage or "design the complex and confusing repayment options and enrollment requirements for borrowers."
FedLoan is also at the center of a state-led lawsuit. Massachusetts Attorney General Maura Healey is suing the servicer for its handling of both the PSLF program and the Teacher Education Assistance for College and Higher Education (TEACH) Grant program.
"They're doing a terrible job," Healey, a Democrat, told NPR earlier this year.
Healey alleges FedLoan has overcharged student borrowers and "prevented [them] from making qualifying monthly payments that count towards loan forgiveness, shifting the consequences of its loan servicing failures onto the student borrowers themselves."
FedLoan also declined to comment for this story but has previously told NPR that the company "does not agree with the allegations made by the Massachusetts Attorney General's Office." The company said it "remains committed to resolving outstanding borrower issues while following the U.S. Department of Education's policies, procedures, and regulations as mandated by the Agency's federal servicing contracts."
In an ongoing investigation, NPR has documented FedLoan's mismanagement of the TEACH Grant program, revealing that thousands of teachers who received college grants to teach in low-income public schools have unfairly had those grants converted to loans, with interest. The Education Department has since launched a "top-to-bottom" internal review of the program.
And there's one more turn to this story — something Frotman tried to headline in his resignation letter:
The Trump administration has chosen sides in this fight over loan forgiveness, and it's not with borrowers. In the absence of federal efforts to rein in servicer mistakes and bad behavior, states have tried to fill the void, passing increasingly tougher consumer protection laws and, occasionally, suing.
Ordinarily a fierce advocate for states' rights, Education Secretary Betsy DeVos is making a bold legal argument: Because these companies work for the federal government, they need not answer to state authorities. They are, in essence, protected from such lawsuits.
In response, half of state attorneys general, including reliably conservative Montana, Tennessee, Kansas and Texas, wrote to DeVos, urging her to reject this "ongoing campaign by student loan servicers and debt collectors to secure immunity for themselves from state-level oversight."
Just this month, 12 state attorneys general signed a pointed letter to DeVos, writing that "the shocking 99 percent PSLF program denial rate is quite simply unacceptable, and borrowers need fixes for the program now."
Seth Frotman was wrong.
Not about the problems with Public Service Loan Forgiveness. They are legion, indeed. He was wrong about being able to take his daughters to the playground after turning in his resignation.
Despite grabbing headlines across the country, Frotman's resignation letter did not get him walked out of the building with a cardboard box. He stayed through the week.
In fact, CFPB leadership met his departure largely with indifference.
Days later, Acting CFPB Director Mulvaney gave an interview to CNBC and was asked about Frotman's fiery departure.
"I never met the gentleman," Mulvaney said, laughing. "Don't know who he is."
The CFPB tells NPR in a statement: "While we disagree with the assertions made in [Seth Frotman's] resignation letter, we wish him the best in securing his future employment."
Friday, Aug. 31, was Frotman's last day, and he did something unusual for a man who had, earlier that week, publicly savaged his boss and the Trump administration:
He brought his wife and daughters to work.
For parts of his seven years at the CFPB, Frotman says, the work had often taken him away from home, and he wanted his girls to see where he'd been all this time, to sit in his chair, to play with his landline phone (their favorite part) and to meet some of the colleagues who had become dear friends.
They posed for pictures. His daughters dressed for the occasion, the 2-year-old wearing a purple sundress and necklace, the 5-year-old in pink with a white flower in her hair. Frotman wore faded jeans, sleeves rolled to the elbows.
"What do you do?" his 5-year-old asked.
"We help people," he replied.
Frotman says the visit was bittersweet, because he was proud of the work he had done and wished he could have kept doing it. He says his daughter could tell there was more to his story, but cupcakes appeared and all was forgotten.
For the record, the cupcakes were not for Frotman's going-away party.
Someone else was leaving, too.
To hear our Planet Money episode on Seth Frotman and Public Service Loan Forgiveness, click here.