Governor Murphy wants state workers automatically enrolled in student loan forgiveness program

New Jersey’s state workers should be automatically enrolled in a federal student loan forgiveness program, Gov. Phil Murphy said Monday.

The governor announced the tentative plan alongside federal education officials during a roundtable at the College of New Jersey on the Public Service Loan Forgiveness Program, which has a history of underperformance.

Murphy said his administration is looking at ways to work with federal education officials to streamline the application process for the program.

“One of the things we’re kicking around with these gentlemen and their team is a system that would automatically enroll eligible state employees who opt in,” he said.

The program was established in 2007 to ease the burden of student loan debt on those going into certain professions. Teachers, government workers, and nonprofit employees, among others, can have their direct federal loans forgiven after 10 years if they make consecutive on-time monthly payments for a decade under a qualified payment plan while working for a qualifying employer.

Those strict requirements, coupled with spotty reporting from the company servicing federal student loans, tanked utilization of the program. In its first year, only 0.3% of those who sought loan forgiveness received it.

Last March, roughly four years after the program could begin forgiving loans, it had done so only about 6,500 times, said Richard Cordray, chief operating officer of the Office of Federal Student Aid. Cordray appeared at Monday’s roundtable with U.S. Undersecretary of Education James Kvaal.

“It’s all gummed up with bureaucracy, and people can’t find their way from here to there,” said Cordray.

The program’s performance improved after President Joe Biden in October issued a limited waiver that counted past payments excluded under the original rules — like those made against Perkins or Federal Family Education Loans — even if they were not made under a qualified payment plan. The waiver is set to expire on Oct. 31.

Cordray said after Biden’s move, more than one million applicants to the program had added a year or more of qualifying payments.

“It’s almost 130,000 who have been fully forgiven, and there’s over a million others who have had their pay counts advance toward the magic 10-year mark,” he said.

Roughly 2,500 New Jerseyans have had about $167 million total in student loan debt forgiven through the program, Murphy said.

There’s no timeline for the implementation of automatic enrollment for New Jersey’s state workers. Murphy said only that he hopes it would come “sooner than later,” adding he wants to adapt the system to local government employees as well.