(Photo: Shutterstock.com)

Early numbers from the federal government's Public Service Loan Forgiveness program look grim.

Of the roughly 28,000 borrowers who applied to have their loans forgiven this year, a mere 289 were approved—or about 1 percent—and just 96 borrowers actually had their loans discharged.

Congress enacted the program in 2007 with the goal of helping people pursue often low-paying government and public service jobs by allowing them to discharge the remainder of the federal student debt after 10 years.

Despite the low forgiveness rate, law students and recent law graduates who are counting on the program to erase their student debt should not despair, according to student loan experts who say those early approval figures are essentially meaningless.

The biggest takeaway from the initial figures the Education Department reported late last month is the sheer amount of confusion and misinformation that surrounds the program, the experts say. Only a small number of people were ever going to meet the myriad requirements necessary to have their loans forgiven at the first opportunity due to how the program was set up. The fact that thousands applied signals that many people simply don't understand how it works, they said. (Those who believe they were wrongfully denied may supply additional information to the Education Department.)

“It's not indicative of what a likely approval rate is going forward,” said Chris Chapman, president of AccessLex Institute, an organization that advocates for the affordability of legal education.

“It's not indicative of some draconian interpretation of the law to keep everyone out, even if you're otherwise qualified. All those years ago, it wasn't clear to people what they should be doing. Going forward, it's very easy to comply and check the boxes if you know what you need to do. I don't think it's a problem.”

Heather Jarvis, an independent student loan adviser who has tracked the program since its inception, said she was surprised by the sheer number of people who submitted applications to have their loans forgiven, given the program's early narrow scope.

“That shows the desperation and need they have for some relief,” she said. “It would be really surprising to me if a lot of people had met the requirement at this point. That's just not how it was ever going to be. I'm talking to a lot of people who now feel like there is some discretion on the part of the Department of Education [to approve or deny loan forgiveness applications], and there really isn't.”

The Education Department released only a handful of figures pertaining to the initial cohort of loan forgiveness applicants. Of the nearly 33,000 applications submitted, about 20,000 were denied for failing to meet the requirements of the program. Another 8,000 were denied because they were missing information, according to the Education Department. In total, $5.5 million in federal loans have been discharged under the program.

Critics have faulted the program for being convoluted and confusing for students. Among the requirements:

• Borrowers must have Federal Direct Loans, which were uncommon in 2007 when the program came online. Two-thirds of higher education institutions in 2007 instead offered Federal Family Education Loans.
• Borrowers also have to be enrolled in an income-based repayment plan in order to qualify for loan forgiveness. In 2007, this option was called income-contingent repayment and it came with higher monthly payments than other plans. Thus, it was less attractive to borrowers.
• Borrowers must also make 10 years of on-time payments while working at qualified public service employers. However, the Education Department had no process for tracking qualified employment for the first five years of the program.

Those requirements were particularly difficult to meet for 2007 graduates—those now applying for forgiveness—because the program was new and information was scarce, Chapman said.

“It really revolves, I think, around the failure of the Department of Education to think about how they were going to implement it and how they were going to determine who qualified and who didn't in the years after it was enacted,” he said. “The earliest cohort will be the most challenged in accessing this benefit.”

An Education Department spokesman did not respond to requests for an explanation of the low approval rate of loan forgiveness applications.

AccessLex is holding four webinars in October geared toward helping these early borrowers navigate the system.

Some applicants for loan forgiveness likely don't have a strong handle on the program and applied in hopes that they met the criteria, Chapman and Jarvis said. Still others may have realized that they didn't qualify, but needed to get officially denied in order to access a program Congress recently authorized to assist public service workers who accidentally signed up for the wrong repayment plans but whom otherwise would qualify for forgiveness. Lawmakers set aside a $350 million fund to cover loan forgiveness for those borrowers, but the money is on a first-come-first-serve basis, meaning early applicants have a better shot of taking advantage it.

Those unique dynamics mean it's nearly impossible to glean useful information about the future of the program from the limited data release by the Education Department, the experts said. But both Jarvis and Chapman agreed that approval rates for the program should increase over time—good news for current students and recent graduates.

“The requirements are clear, but they are many and they are detailed,” Jarvis said. “As long as an individual borrower is well-informed and takes the steps necessary to make sure they have the right kinds of loans and enrolled in the right kind of repayment plan, and that they are eligible full-time employment, then public service loan forgiveness can be achieved.”

The bigger concern for recent borrowers should be the future of the program itself and the availability of federal student loans, Chapman said. Republican lawmakers have proposed eliminating loan forgiveness and capping federal graduate loans at $28,000 a year, though that legislation is on hold during election season. Chapman predicted that the program will survive thanks to bipartisan support, but it may well be curtailed in some ways.

Jarvis said the latest Education Department figures are a reminder to borrowers that they must mind the details.