Peace Corps Volunteers Fall Through the Cracks of a Student Loan Fix

 

Peace Corps Volunteers Fall Through the Cracks of a Student Loan Fix

“Your Money”
By Ron Lieberm New York Times
Nov. 13, 2021

 

A deserving group of dedicated people has been left out of the government’s latest patch for the Public Service Loan Forgiveness program.

 

When the Education Department announced fixes for its deeply dysfunctional Public Service Loan Forgiveness program last month, hundreds of thousands of long-suffering borrowers were suddenly given a chance at the kind of relief that the federal government had long promised them.

But a small, highly deserving group was left out, even though its volunteers passed through a particularly venerable government service program: the Peace Corps.

Many Peace Corps alumni say they — like others who are now getting help, including members of the armed forces — received bad advice that set back their attempts to wipe away their loans. But the federal government hasn’t seen fit to solve their particular problem.

“We’re supporting war in this country but not peace,” said Bonnie Rico, a former volunteer who said she had gotten bad information from both her loan servicer and Peace Corps staff.

The P.S.L.F. program is one that well-meaning legislators, regulators and bureaucrats bungled badly from the moment it became law in 2007. In short, P.S.L.F. is supposed to erase the remaining federal student loan debts — tax free — of people in a variety of nonprofit and government jobs after they make 120 on-time payments.

The original program, however, excluded people in certain kinds of loans or payment plans. And because of years of poor communication and customer service, many found out too late that they were in those excluded groups. The payments they made — for years, in many cases — did not count.

To make good on what the Education Department itself acknowledged was the program’s “largely unmet” promise, officials decided that many of these borrowers could now get credit for their payments. Officials also said they would count the months of service by members of the military who deferred — that is, didn’t make — payments while on active duty.

But the changes leave out Peace Corps alumni who similarly deferred payments, even though many did so on the advice of Peace Corps administrators or their student loan servicers.

“I didn’t really have a whole lot of guidance from parents or family members about managing my loans,” said Michelle Swanston, a first-generation college student who served two years in AmeriCorps and a bit more than two in the Peace Corps. “So I just listened to the advice of the organizations that I was going to.”

Ms. Swanston and Ms. Rico are members of a Facebook group of people trying help one another navigate P.S.L.F. When necessary, they have also begun lobbying the Education Department and others for clarification or changes.

“We’ve decided to make a headache for anyone in power who will listen,” said another member, Corina Niner, who, like Ms. Swanston, was sufficiently dedicated to the Peace Corps’ mission that she went on to work at its headquarters.

I asked the Education Department if there was a reason the Peace Corps volunteers didn’t receive the same consideration as members of the military. I didn’t get a clear answer. But an Education Department spokesman said the newly improved P.S.L.F. was still being discussed as the department engaged in further rule-making. A Peace Corps spokeswoman said the organization would continue to work with the department and hoped to have a “favorable outcome” for as many volunteers as possible.

Deferring payments did make a certain kind of sense to the volunteers I spoke to. After all, Peace Corps participants earn only a small stipend, so having no monthly bill to pay was appealing. But there was a way to do essentially the same thing and still get credit for their time in the program — often 27 months or more if they headed to a second country.

Volunteers could have entered an income-driven repayment program and — if everything worked as it was supposed to — would have had their payments reset to something they could afford. With only their meager Peace Corps stipend, their payments would most likely have dropped to zero.

So what sort of people managed to figure that out on their own during the several years that passed after the 2007 legislation? I found only one: Arturo Alvarez, a lawyer who passed the California bar exam after working part time in a financial aid office for a few years during law school. He began his Peace Corps service in Mozambique after that, in 2016, and said the vast majority of the fellow workers he had encountered had been deferring their loans, which would not get them credit for each month that they were in the Peace Corps.

How did so many people make the wrong move? Poor information that lingered for years.

Peace Corps documents from 2010 — three years after the P.S.LF. program became law — refer to deferment as a “reward” and “benefit” of volunteering for the service. Some volunteers from the first half of that decade say staff members even facilitated their deferral requests during orientation meetings. Crucially, according to everyone I interviewed, there was never any mention of P.S.L.F. at orientation during the forgiveness program’s early years.

It’s not clear when, exactly, the Peace Corps started to inform volunteers about the program. By 2014, the Peace Corps had documents about it on its site, but many volunteers of that era said they had never seen them or had simply followed the cues about deferment that were still coming up during orientation.

The problem was compounded by one of the P.S.L.F. program’s endemic dysfunctions: unhelpful loan servicers. With just one exception among my interviewees, former volunteers of that period said their servicers’ near-automatic advice had also been to defer payments. Clearly, the messaging about forgiveness and the Peace Corps was muddled from the start, though the 2007 P.S.L.F. legislation specifically included volunteers as eligible borrowers.

The law also includes a convoluted passage that allows volunteers to hand over all or part of the lump-sum award they get at the end of their service in exchange for a maximum of 12 months of credited payments. Few volunteers ever found out about this option, either, although it’s doubtful many would have tried it; those I talked to almost immediately put the lump-sum award toward basic expenses, like a place to live.

“I remember buying a van,” said Ms. Rico, who served in Albania. “Not because I needed a big van but because it was my homeless backup plan.”

Another former Peace Corps volunteer who also worked at its headquarters, Katie McSheffrey, thinks the Education Department eventually figured out that the volunteers could take Mr. Alvarez’s approach with the income-driven repayment plan, but failed to communicate the message.

If the fixes announced last month had applied to her, Ms. McSheffrey’s loan debt would have been wiped away immediately. Although she was thrilled for the military personnel whose deferred loans were covered by the changes, she said it was frustrating to be left out.

“I’m assuming they waived things for the military because they were not given adequate information,” she said. “Well, Peace Corps members weren’t, either.”

Fortunately, it is still possible that the Education Department could address the problem. But a new rule could take until 2023 to take effect, and it’s not clear whether any changes would be retroactive.

As with any student loan problem, it’s always tempting to blame borrowers: They should have done more research and asked more questions. But as I and others have chronicled again and again over the years, they did ask questions and were often given wrong answers.

The Peace Corps carefully straddles the line between borrower-blaming and contrition. “The ultimate responsibility for any payments or changes in status for student loans rests with the borrower,” the organization’s acting director, Carol Spahn, wrote in an email last month to Sarah Kilchevskyi, who is helping to lead a group of former volunteers seeking credit for their service. “If any information provided to you by the Peace Corps was inaccurate or incomplete, I sincerely apologize.”

Big public policy fixes often leave out deserving people. But the Peace Corps volunteers who simply did what they were told while in the service of their country should get more than an apology that begins with an “if.”

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Ron Lieber has been the Your Money columnist since 2008 and has written five books, most recently “The Price You Pay for College.” @ronlieber