On a call with reporters Tuesday, education officials put those concerns to rest by clarifying that the president’s proposal would only affect people taking out loans on or after July 1, 2018. The same is true for all of the other loan proposals included in the budget, such as getting rid of subsidized loans that require the government pay a borrower’s interest while he is in school, according to education officials.
Many higher education policy wonks suspected that borrowers in the public service program had a contractual right to receive forgiveness under the terms of the promissory note they signed, but the issue was still up for debate, much like the merits of the program itself.
Public Service Loan Forgiveness, enacted in 2007 under President George W. Bush, was designed to encourage college graduates to pursue careers as social workers, teachers, public defenders or doctors in rural areas. But the program’s detractors have criticized it as a backdoor subsidy for graduate school, and one that primarily helps doctors and lawyers with tremendous earning potential.
Yet supporters of the program say it is necessary to convince attorneys and doctors, who routinely take on six-figure debt for their education, to forgo lucrative practices in service of the public. What’s more, many teachers and social workers whose wages often pale in comparison to the amount of student debt they owe also benefit from the forgiveness program.
Still, the cost of the program has made it a lightning rod for criticism. A Government Accountability Office report in 2015 said the typical borrower in the program owes about $70,000, with 1 in 4 on the hook for more than $100,000. Even if a quarter of the people going through the verification process fail to receive forgiveness, the government would still be responsible for canceling billions of dollars in student loans.
As it stands, the Education Department is locked in litigation with borrowers who claim the agency inexplicably changed the eligibility requirement for employment that counts as public service after approving the work. In court documents, the department said there is no guarantee that forgiveness will be granted, a statement that has raised questions about the viability of the program.