Letters approving people for student loan forgiveness could be invalid, Ed. Dept. says

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For thousands of loan recipients who thought their student loan debts would be forgiven by the government, the Department of Education has chilling news.

Last week, the department hinted in a legal filing that FedLoan Servicing — the administrator of a federal loan forgiveness program, which had previously informed hundreds of people that they qualified to receive its benefits — might not have been authorized to do so.

According to the New York Times, more than 550,000 people signed up for the Public Service Loan Forgiveness Program, which writes off student debt after 10 years of full-time work for a qualified public service employer. 

The program covers people in a diverse array of jobs, from firefighters and doctors at public hospitals to nonprofit employees. For many who were told that they qualified, the decision to work in the public service sector was predicated solely on the assumption that were doing so in exchange for having their student loans repaid. 

Even after receiving notices from FedLoan Servicing saying that they were approved to receive the program's benefits, some of those individuals were told years later that their jobs no longer qualified.

In its recent legal filing, the Department of Education said those initial acceptances had been non-binding and could be reversed at any time.

A 2012 protest in Los Angeles against the high cost of college education in the U.S.  David McNew/Getty Images

The filing comes just as "the first potential beneficiaries reach the end of their 10-year commitment — and the clocks start ticking on the remainder of their debts," according to the Times.

Four of the borrowers and the American Bar Association have filed suit against the Department of Education in the hopes of having their eligibility restored.

Jamie Rudert, one of the plaintiffs, told the Times that the sudden reversal was "really perplexing."  

"I've never gotten a straight answer or an explanation from FedLoan about what happened, and the Department of Education isn't willing to provide any information," he said.

The federal forgiveness program was approved by Congress in 2007 as part of a bipartisan effort to encourage more Americans to take jobs in the public service sector.

But now, some individuals with thousands of dollars of student loan debt are seeing that incentive yanked away — just shy of a finish line that took 10 years to reach.

Natalia Abrams, the executive director of the advocacy group Student Debt Crisis, told the Times that the Education Department's amorphous parameters for what qualifies as a nonprofit organization makes it particularly tough to guess which individuals will ultimately see their debts forgiven.

"It's kind of a no man's land," she said. "We don't know how this will pan out."