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Public Service Loan Forgiveness is Key for Millions of Borrowers

Created in 2007, the Public Service Loan Forgiveness (PSLF) program allows for federal student loan forgiveness for teachers, nurses, firefighters, and other critical public and non-profit workers after ten years of on-time monthly payments. Now, the first wave of eligible borrowers is ready to receive forgiveness. Unfortunately, the PROSPER Act, recently proposed by House Republicans, would eliminate the program for future students altogether, despite recent investment from Congress that bolstered the program. Congress’s investment signals a clear understanding of the positive impact that the program could have on allowing young people to pursue careers in public service industries. Young Invincibles strongly opposes any cuts or arbitrary caps to PSLF on behalf of the millions of young people watching anxiously as proposals like the PROSPER Act threaten this vital pathway to financial security.

At its core, PSLF is intended to attract qualified graduates to civic and public professions without the tradeoff of financial stability. Public school teachers with degrees at the Master of Education level, for example, shoulder 16 percent of total U.S. student loan debt but make an average of 17 percent less per week than comparable workers. PSLF allows teachers to pursue required, but costly, education so they can provide quality instruction to over 50 million schoolchildren. Similarly, the health care industry, facing a looming nurse shortage, is proposing that 80 percent of nurses have baccalaureate degrees by 2020. Without PSLF making investment in expensive BSNs or doctorates manageable, this proposal could prove to be a disproportionate barrier to entry into the nursing field for many aspiring nurses from rural, minority, and low-income backgrounds, who often choose to pursue certifications and associate’s degrees over other credentials due to cost. This need applies to our armed forces as well: the U.S. Naval Institute reports that almost 6,800 active duty military personnel are enrolled in PSLF, and that cutting it would have a significant impact on recruitment and retention. The effect of PSLF elimination would be felt across hundreds of jobs and industries, both civilian and military, and could disincentivize, or entirely deter, students from not only pursuing these careers but from staying and becoming leaders in them, exacerbating existing difficult recruitment, retention and diversity challenges.

Even as PSLF seeks to expand and diversify the pool of college graduates who can access public service jobs, the question of who PSLF serves remains one of its biggest challenges. In particular, the definition of “qualifying employment” for forgiveness is nebulous, resulting in huge swaths of service groups not qualifying for forgiveness at all. While relevant statutes have established that employees of governmental and 501(c)3 employers definitely qualify, the status of other nonprofit employees that provide clear public benefits is murky. Most notably, employees of veterans-serving groups have been informed by the Department of Education that their employers do not qualify for the program. Many of these organizations provide veterans with resources once they end their service, including treatment to overcome mental illness, and help pursuing education and jobs. More clarity is needed around which employers qualify workers for loan forgiveness, how the qualified employer determination is made, and why so many groups providing clear public services are being excluded. In the immediate term, Congress should include organizations working to serve our veterans in the program.

While there has been no legislative or administrative solution to the qualifying employer gap, Congress acknowledged in the fiscal year 2018 omnibus that something must be done to ensure that borrowers who have made payments for ten years but were unknowingly in a non-qualifying payment plan get an opportunity to obtain PSLF. Under current PSLF guidelines, more than 550,000 borrowers have worked to meet strict loan type, payment, and employment qualifications. But other borrowers, despite being in income-based repayment plans, having qualifying employment, and making 120 payments, have been told upon applying for forgiveness that they aren’t in the right plan to achieve loan forgiveness, in some cases destroying their hopes of relief. Congress acted to address this problem by including a one-time $350 million allocation to create a first come-first served “Loan Cancellation Fund” in the recently passed omnibus, which would allow the Secretary of Education to provide loan cancellation for the aforementioned population of borrowers, provided they qualify under the existing statutory requirements outlined above. This is an important first step towards ensuring that PSLF meets its promise of providing relief to the full universe of dedicated public servants seeking it.

Beyond statutory and legislative questions, the administration of the program continues to be a source of apprehension to student borrowers. Although the first cohort of borrowers is now eligible, and at least one borrower has gotten forgiveness, there have been no recent official reports from the Department of Education that indicate how many students have received forgiveness so far. Acknowledging a level of uncertainty among borrowers concerning the terms and conditions of PSLF and how to apply for forgiveness, the recent omnibus also contained a $2.3 million allocation to enable the Department of Education to conduct outreach to borrowers who intend to apply for PSLF to ensure they meet program requirements. We hope the Department of Education uses this recent investment to rectify existing administration gaps and make the program more easily accessible to qualifying borrowers.  

Recent investments in PSLF underline how valuable the program is to America’s student loan borrowers and public service industries, including the U.S. Department of Defense, and U.S. Navy, but that is not stopping the program’s detractors from attacking it. With a student borrower population that shoulders an average of $30,000 in debt per undergraduate degree and $57,600 per graduate or professional degree, and a workforce that increasingly requires these costly degrees, PSLF is an important bridge to public service careers and long term financial security that must be protected and strengthened. Moving forward, Congress should work to ensure that the program’s administration processes and qualification guidelines are clear and that the program captures the full universe of borrowers who are working in good faith towards forgiveness. We urge Congress and the Department of Education to preserve PSLF as an investment in one of our country’s most valuable resources: a new generation of qualified and diverse public servants.