In the fall of 2007, on the eve of the Great Recession, President George W. Bush signed an expansive bill into law devoting billions of dollars of new aid for student loan borrowers and establishing a new initiative for public service workers: Student loan debt left over after 10 years of payments would be forgiven.
The law won bipartisan praise and was embraced as an overdue overhaul of the way we finance opportunities for higher education. Former Rep. George Miller (D-Calif.), the bill’s lead sponsor, deemed the effort “the greatest investment to help students and parents pay for college since the G.I. Bill.”
To be eligible, a borrower must be in an income-based repayment plan; her employer must certify that she works for the government or a 501(c)(3) nonprofit; and her student-loan debt has to be transferred to FedLoan Servicing, the servicer that tracks payments for the loan forgiveness program. After 120 payments, borrowers submit proof to the Department of Education that they’ve been working for a qualifying employer over the past decade. This can also be done annually, instead of all at once. Once these terms have been met, the balance is forgiven. The waived balance is not treated as income, and therefore isn’t taxable.
The loan forgiveness component was intended to spark more interest in public sector work, careers that often can’t compete with the higher-paying private sector for job-seeking graduates. More than a quarter of all jobs in the country are eligible to enter the forgiveness program, and since 2007, more than a half-million people have signed up. The promise of student loan forgiveness makes becoming a teacher, cop, librarian, public defender, public health worker, nonprofit employee or doctor in an underserved area more attractive.
All that could be coming to an end.
Though thousands of Americans have made higher education choices and built their lives around the promise of loan forgiveness to pursue careers in public service, the Trump administration is hoping to shut that down, according to the White House’s 2018 budget. It’s part of a pitch to slash $10.6 billion from federal education initiatives. Officials hope to steer some of the savings toward its school choice agenda, increased funding for charter schools and bolstering private and religious school vouchers.
As word about the program’s threatened elimination spread, panic among public service workers has reached a fever pitch.
Just ask Alex Turpin, a 31-year-old clinical social worker at a nonprofit hospital in New Jersey. He is three years into the forgiveness program and trudging his way through about $75,000 in student loan debt. Agreeing to work for a nonprofit, he said, has been a salary sacrifice, a loss softened by the assurance of debt relief.
“The idea that this program would be cut is monstrously frustrating and disrespectful,” Turpin said. “There is a lot at stake for me and many of my co-workers.”
Or Katharine Gordon, a Washington-based public interest lawyer who works in disability rights and immigration law. She is a forgiveness program enrollee and has been paying up to $700 a month to chip away at around $85,000 in federal student loan debt she is shouldering from law school. Just three years away from being able to cash in on relief, she’s deeply troubled by the administration’s plan.
“I’m paying an interest-only loan at predatory interest rates with the hope that after I’ve fulfilled my end of the bargain — 10 years of public service — I can be freed from this ridiculously expensive loan,” Gordon said. “As the end is approaching, that the government may break its contract with me is horrifying.”
I, too, was prickled by a heavy sense of dread reading about the proposal. I’m a first-generation college student from a blue-collar family. Having attended an expensive private university, I left my college campus with both a diploma and a bill of more than $70,000 to the federal government. For the past four years, I have worked in public radio, and the attendant nonprofit status of my employer has allowed me to become one of the over 500,000 who’ve opted in. Besides being committed to the mission of public media, the bonus of the forgiveness program is a benefit I literally cannot afford to forsake. I’ve been planning my life as if a substantial slice of my federal student loan debt haul would be cleared in exchange for sticking around in nonprofit media for a decade. Major decisions, including buying a first home, have been put off, the timing calibrated as if student loan debt reprieve were a forgone conclusion — which it was until Trump’s budget was announced. Nixing it would inevitably change those plans.
Some anxiety was tempered among borrowers like Turpin, Gordon and me after Department of Education officials told reporters the president is proposing to kill the program for loans on or after July 2018, meaning those currently enrolled would be grandfathered in.
Not shredding the deal hundreds of thousands were promised is especially relieving to those at their 10-year mark, since the first wave of forgiveness is scheduled to start this fall.
Still, placing the program on the chopping block at all has made people like Oregon City, Ore.-based Lacey Sortman jittery about the future. She works at a disaster relief nonprofit and her husband is in college. Sortman is enrolled in the forgiveness program, and her husband was counting on doing the same.
“And now what?” Sortman asks. “Do we start planning for what life is like if we’re abandoned here? What is a repayment plan on this debt going to look like and for how long? Can we afford for my husband to finish his degree?”
Natalia Abrams, executive director of Student Debt Crisis, said not only will abolishing the program likely affect how many people decide to start — or finish — graduate school, but the ramifications will be felt throughout the economy.
“It can discourage people to go into public service, and that’s the biggest thing I’m worried about,” Abrams said. “It’s going to make it harder for nonprofits to recruit, because they often use the public service loan forgiveness program as a recruitment tool.”
A search on idealist.org, an online database of do-good jobs, returns dozens of listings, from public health clinic coordinator in Long Island to youth volunteer organizer in Providence, promoting the forgiveness program as a job perk. But the pitch to prospective public servants soon may have to be revised.
Abrams said her group has been flooded with calls from concerned borrowers and employers since the idea of scraping the forgiveness program was revealed, and she’s now assembling a campaign to encourage people worried about it to write their members of Congress about how such a move impacts their lives.
“These are highly-skilled, highly-educated professionals who are planning out their life and this is what they have been expecting, “ Abrams said. “Only to find out now that this is something they shouldn’t build their dreams on because the rug might be pulled out from under them.”
This is not the first time Abrams and other advocates rallied their base in defense of preserving public service forgiveness. In 2015, House Republicans proposed getting rid of it, but the idea was put on ice. President Barack Obama’s 2016 budget attempted to alter the program by suggesting a $57,500 cap on the total amount of debt that could be forgiven, but that didn’t pass either.
Criticism of the program has come from many corners. Some experts identified what they called a “doctors’ loophole,” saying that highly paid physicians working for nonprofit hospitals were the biggest beneficiaries, with certain doctors poised to discharge six-figure debt loads, making the program look like a subsidy for the already well-off.
A paper published by the Brookings Institution last year found that the median debt amount of those in the program exceeds $60,000. About one-third of enrollees borrowed more than $100,000. In the report, American Enterprise Institute fellow Jason Delisle makes the case for curtailing the program by enacting caps, like those Obama proposed, which the Congressional Budget Office estimated to save taxpayers billions of dollars. Even scrapping it completely, Delisle writes, makes sense, since other forgiveness programs that waive debt after 20 or 25 years could, in some situations, actually benefit public service workers more. “That makes [public service loan forgiveness] redundant at best and excessively generous at worst,” he writes.
Worries about a bait-and-switch scenario were stirring before the details of the Trump administration’s budget became known. In a March legal filing, officials from the Department of Education suggested that initial acceptance into the program is not binding at the end of 10 years and that letters from servicers saying that a borrower’s job qualifies as public service can be reversed at any time.
If that level of uncertainty becomes widespread, borrowers in the program have reason to be alarmed, yet it would be far more devastating if lawmakers decide to kill the initiative altogether.
Student loan debt has more than doubled since the program started, just as people with college degrees have not seen meaningful increases in earnings. If this remains the case, new incentives to pursue public service work will be needed to keep public health clinics, public defender offices and nonprofit companies fully staffed.
While growth in the public service forgiveness program has been strong, out of the country’s 44 million student loan borrowers, just 1.2 percent are participating. The prospect of a good portion of them heading to the private, for-profit sector, leaving many modestly-paying public interest jobs unfilled, isn’t just an academic exercise; it’s a legitimate worry. It could have negative consequences for citizens who benefit most from the work of public servants.
“It’s an example of being incredibly out of touch with how ordinary Americans cope with the high cost of college,” Sara Goldrick-Rab, a professor at Temple University’s College of Education, said of the forgiveness program’s proposed death. “We don’t need the people in these already underpaid jobs to feel worse about their future.”