Lawsuit claims government reverses decision on student loan forgiveness

- There is a big blow potentially awaiting hundreds of thousands of students who participated in the government's federal student loan forgiveness program.  Their years of hard work may now be invalid.

But let's pause for a little history first. Ten years ago people began signing up for a program through the Department of Education called "Public Service Loan Forgiveness," which meant when you leave school your federal student loans would be forgiven if you did a few things.

                      PUBLIC SERVICE LOAN FORGIVENESS

  • Worked a government, public service, or non-profit job
  • Got approval from government contractor FedLoan Servicing
  • Worked full-time for 10 years in one of the above fields
  • Made regular, timely federal student loan payments

It's a great deal for a lot of people - teachers, doctors, lawyers, firefighters - anyone who would leave college with crushing loans.

If you started the program in the beginning, your 10 years is up in October.  But a new lawsuit filed says the Department of Education "without notice or explanation" has "changed its mind."

The suit claims that the government has been telling some folks who got their jobs OK'd through its contractor FedLoan Servicing that they had "been approved in error."  They're rescinding approval.

So, let's say you've spent years in one of the public service jobs, which are often low paying, all of that commitment may be for nothing. I sat down with an attorney Chris Armor of Amor Law specializes in student loan debt issues.

"The Department of Education in response to this lawsuit stated in their answer that FedLoan Servicing is not a reliable (company) to speak on behalf of the department, as far as determining which employers are eligible for this program," he said.

Yet they still say on the Department of Education website that they are.

He added that this leaves a lot of confusion. "It's insane."

What's more, there's no way to appeal. The FOX 5 I-Team has reached out to the Department of Education who emailed after the story aired to say they don't comment on pending litigation.

Some people, like lawyers for example, could have gone early in their careers to a law firm which would have been more lucrative. Instead, she has spent 10 years, while helping people, earning very little.  Not to mention, all of these talented people willing to work for non-profits and such are going to pass when they graduate.

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