More than 80,000 Americans have taken low-paying public service jobs in return for the federal government's promise of student debt forgiveness. As required, they stayed at those jobs for 10 years. Now it turns out they're stuck with their debt after all. 

In 2007, Congress created a program that was supposed to solve two problems at once. It was to reduce the growing burden of student debt for America's young college graduates, and also help supply applicants for hard-to-fill low-paying public service jobs. The idea was simple enough. Graduates who took these not very popular jobs and kept them for 10 years while also keeping up with their student loan payments would have the remainder of their student debt forgiven. Tens of thousands of people signed up for low-paying, high-stress, and sometimes dangerous jobs such as teachers, nurses, and fire fighters in order to have their debt forgiven. According to a New York Times report, in 2017, the first 28,000 people who'd held these jobs for a decade and kept up with their student loan payments during that time applied for the loan forgiveness they believed had been promised to them. Only 96 were approved. 

In 2018, Congress created an emergency program to fix the original program, eventually funding it with $700 million. But you can't apply for it until you've applied to the original program and been rejected. And even after you've done that your odds of success are still less than 1 in 100. Many thousands have applied but the emergency program has forgiven the student debt of only 656 people so far.

What the heck went wrong? There's plenty of blame to go around, but this seems to be the sequence of events: First, Congress wrote and passed a law that was extremely complex and incredibly vague at the same time. Then the federal government hired a contractor, a company operating under the name FedLoan Servicing, to administer the program. Then the government basically forgot about it, leaving the contractor to manage the program with minimal oversight. That was problematic already, but just to make things even more uncertain, Congress changed the rules around in 2010, expanding eligibility in some ways, but rendering many existing loans ineligible for forgiveness. 

Too many reasons for rejection.

If all this sounds like a recipe for a train wreck, it was. But even if the program's administration had worked perfectly, there are simply too many reasons that an applicant who's worked for 10 years at a public service job could still be turned down for student loan forgiveness.

The first hurdle is trying to figure out whether a specific employer qualifies as public service or not. Governments at all levels do, but government contractors may not. Not-for-profit companies may qualify depending on their tax-exempt status and the kinds of services they provide. Wondering if your own employer qualifies? Unless it's a government or a 501(c)(3) not-for-profit, there's no clear answer. To make matters worse, FedLoan has in some cases determined that an employer qualified and then revoked that decision later on.

Next, you have to figure out if your loan qualifies under the program. Only direct loans from the federal government--not federally guaranteed bank loans--qualify for forgiveness. But even if you have a government loan, if it is from before July 1, 2010 it is likely Federal Family Education Loan (FFEL) which is ineligible for the forgiveness program. If you have ineligible loans, one solution might be to consolidate them as a direct loan. However, that resets your 10-year clock to zero.

If all that isn't challenging enough, in order to qualify, you have to be on the right type of repayment plan, usually an income-based repayment plan. Many of the applicants were turned down because they were making repayments on the wrong kind of repayment plan. When things are this confusing, it might seem like a good idea to simply call the loan servicer and ask whether your employer, loan, and payment plan are eligible and whether you're on track to receive loan forgiveness. Unfortunately, a government audit found, FedLoan employees would sometimes tell borrowers they were on track only to deny those borrowers' applications later on.

No wonder such a tiny percentage of applicants actually get loan forgiveness. "The odds of somebody getting through this process--they'd be better off buying lottery tickets," said Robert C. Scott, chair of the House Education Committee, at a hearing about the program. To make matters worse, the income-based repayment plan borrowers must use to qualify, often results in payments that aren't enough to cover the interest on their loans, meaning that their total debt has gotten bigger rather than smaller during their 10 years of low paying employment. Not a problem if the loan is to be forgiven. A very big problem if it isn't.

As you might expect there have been lawsuits. The American Federation of Teachers has sued the Department of Education and 21 states have contributed briefs in support of the suit. A student group has sued both the Department of Education and the Consumer Financial Protection Bureau for failing to oversee loan servicers. You can be certain there will be more.

Meantime, what's a borrower to do? If you're working at a public service job in the hopes of having your student loan forgiven, I'd suggest spending some time on the FedLoan site carefully going over the eligibility requirements and making very sure you've checked all the boxes. There's a form you should submit once a year--or whenever you change jobs--to confirm that your employer qualifies. None of this is a guarantee but it will give you your best shot at getting your loan forgiven and should also tell you if you need to consolidate your loans in order to qualify--which you'll want to do right away.

If you're a recent graduate considering a public sector job in order to gain student loan forgiveness--I hate to say it, but you should probably avoid this federal program. Some municipalities and some individual employers are offering student loan help. That's probably a safer approach.