Like most worthwhile policies, Public Service Loan Forgiveness (PSLF) costs money. But in Jason Delisle’s recent article, The spiraling costs of a student loan relief program, he exaggerates the costs and never discusses the benefits of the program. As a result, the picture he paints is misleading.
Jason implies the cost of PSLF – a program that enables borrowers with student loans to earn forgiveness after making 120 on-time monthly payments while working full time in public service – is limitless by stating that the potential eligibility of the program is twenty-five percent of the workforce. This is pure hyperbole.
Only a small percentage of the workforce that is theoretically eligible for PSLF has student loans and will stay in public service jobs for the ten years necessary to earn forgiveness. According to the Consumer Financial Protection Bureau, over the ten years PSLF has been in existence, 550,000 borrowers have asked for and received approval that their jobs qualify. (You’ll note this is far below twenty-five percent of the workforce.) And less than half of those borrowers have made a payment that qualifies toward the 120 they need.
Jason also consistently fails to put the cost of PSLF in perspective. A study by Equal Justice Works indicates that the average graduate and professional student will repay almost the entire amount they borrowed before earning forgiveness. A small tweak to Jason’s handpicked example demonstrates why this is the case. According to the Department of Education’s repayment estimator, a borrower with $50,000 in loans (the same as Jason’s example) and $45,000 in salary ($5,000 more than Jason’s example) enrolled in Income-Based Repayment (an income-driven repayment plan in which they pay fifteen percent of their discretionary income) would repay $54,471 before earning forgiveness. In other words, this borrower would repay more than they borrowed and the forgiveness they earn for ten years of public service would be all accrued interest.
In addition, the Congressional Budget Office has estimated the federal government will earn $184 billion from student loans made between 2013 and 2023. The amount invested in PSLF will be a small fraction of that. And that investment is a good one because – although you would not know this from reading Delisle’s article – PSLF is working exactly as intended to foster long-term public interest careers.
Delisle argues that PSLF and income-driven repayment plans are the same thing and therefore PSLF is unnecessary. But, as the bipartisan legislators knew when they separately created PSLF, this is far from the case. Income-driven repayment plans are a safety net for low-income borrowers who would otherwise be unable to repay their loans and would fall into (far more expensive and financially ruinous) default on their loans without their protection. They provide very long-term (twenty, twenty-five or even a proposed thirty year) taxable cancellation of those loans for those who are never financially able to repay their loans in full. They are a necessary safety net– but they are not an incentive for talented students with debt to enter into long-term public service.
PSLF allows talented young people who are willing to sacrifice their earning potential in the private sector to instead commit their careers to serving others in lower-paying public service jobs without having to spend a lifetime worrying about their student loans. It is an affordable and critical investment that directly benefits all our communities.