Anniversaries are often a good thing, something to be celebrated. For over 400,000 Americans, the tenth anniversary of the Public Service Loan Forgiveness Program should be a time to celebrate. The program is pretty simple, for those who work for the government or nonprofits there is a way to get those overwhelming student loans paid in full. The basis of the program is that these workers trade ten years of public service and on-time payments for debt cancellation after ten years.
The program sounds amazing and is a big selling point for many to go to work for either a nonprofit or the government. Some may take jobs that pay less for the chance to be out from under the debt after ten years.
The problem is that since the program is not yet ten years old, no one has ever made it to the point to have the debt canceled. It looks like this may or may not happen, and there is even some confusion as to how much it could cost the government. Since there was no real way to pay for the loans in the budget, this may end up being a liberal scam.
According to a recent report about upcoming federal budgets:
“The program could cost the government more than originally expected, according to the Government Accountability Office. The Obama Administration had proposed capping the amount borrowers could have forgiven at $57,500, but that proposal was never approved and forgiveness remains unlimited.
The median borrower in the program has more than $60,000 in student debt and almost 30% of them have more than $100,000 in debt, according to a Brookings report.”
Many workers made life long career decisions to join the federal government staff as a way to address large amounts of student loan debt. One such example of this is Daniel J. Crooks III. He is a state attorney who has stayed in federal service to help pay off over $300,000 in loans for law school. He is four years into the program. According to Crooks:
“It would be absolutely detrimental to those of us who have planned our lives around this program. It would be the equivalent of pulling the rug out from under us.”
The program has been an essential recruiting tool for many government offices and nonprofits. It draws new talent from going into the private sector and instead entices them into long-term government service. Sadly the program even in its original form as it stands now has not always been easy to use.
According to Rohit Chopra, a former student loan ombudsman at the Consumer Financial Protection Bureau, “It’s one of the more convoluted programs that Congress has designed.” For those who manage to correctly use the program, they have been able to figure out the fundamental formula:
“You need the right kind of loans, the right kind of job, and need to also be enrolled in an income-driven repayment plan. Signing up for that repayment plan alone requires submitting information about your income each year — a process which can take weeks and temporarily stop the clock on your ten years of payments.”
Beyond having issues with the promise of a program that for some became impossible to even access, the fact is that this mess has been left for the new administration to somehow pay for. The real costs of the decade-old program are difficult to figure since there were no caps put on the dollar amount to be paid off.
New budget documents leaked earlier in the week point to the possible end of the program. It is not clear at this stage how that would happen or what that means for people like Crooks who is not even half way into his ten years of payments. He was lured into working in a government job for a reason that may be going away. His plan to be able to pay off $300,000 in debt in exchange for working for the government may not be available. This can be very frustrating for many as they have already performed the service needed to complete their end of the agreement.
If budget cuts did include a stop to the program, this could happen in one of these several ways. First, the program could stop taking new applicants. Second, the program could be set up to put a cap on the amount of money it will pay off, but this seems shaky at best because these caps were not a part of the original offer many workers bought into. Thirdly, the end to the program could mean stopping it all together and not allowing anyone who has not already completed the ten years of both service and payments at the time of the shut-down to collect.
In this case, the program seems to be a lot bigger than anyone planned on. Over the last decade, prior administrations quietly allowed the program to continue with future promises they would never need to budget for. They primarily played the hero by promising to make these loans disappear without any real way to pay them off. President Trump and Congress now need to figure out if they can pay for the empty promises made over a decade ago.