Public Service Loan Forgiveness (PSLF) was meant to persuade some graduates to take public service jobs instead of more financially lucrative work in the private sector. However, the program has been a spectacular failure, plagued by embarrassing mismanagement with the vast majority of individuals applying for forgiveness rejected by the program. Capitalizing on the sustained pressure for broad student loan cancellation, labor unions are now lobbying President Joe Biden for targeted executive action to forgive student loans of individuals working in public service jobs.
Unions Push Student Loan Cancellation For Public Service Jobs
On April 1st, a broad array of unions sent a letter to Education Secretary Miguel Cardona calling for the Biden administration to fully forgive student loan debt for those who have worked in public service jobs for more than 10 years. The unions collectively represent more than 10 million public service workers including teachers, government employees, health care workers, and fire fighters. In their letter, which was first reported by Politico, they argued that not only has the PSLF program been poorly managed, but the coronavirus pandemic has also accelerated the need for action.
“The COVID-19 pandemic underscores the need for immediate action,” the unions wrote. “Public service workers who should have already benefited from the Department of Education’s Public Service Loan Forgiveness (PSLF) program are serving on the front lines of our pandemic response — caring for patients, teaching our students, and delivering essential services in communities across the country. After four years of scandal and allegations of widespread mismanagement, it is clear to our organizations that the federal government has fundamentally failed to deliver on this promise.”
Public Service Loan Forgiveness Overview
About 25 percent of the nation’s work force may qualify for the PSLF program, according to the Consumer Financial Protection Bureau (CFPB). The program is geared towards people with federal student loans who work for 10 years at an eligible employer and make 120 eligible payments. Qualifying employers include some non-profits, public hospitals, and any U.S. federal, state or local government agency, which means that public schools, colleges, and universities are eligible. Those who are approved have the remainder of their student debt forgiven, tax-free.
Given that the federal program was approved in 2007 and it takes at least 10 years to qualify for PSLF, 2017 was the first year that borrowers could apply for forgiveness. Issues emerged right way due to the program’s complexity. Myriad Americans received bad information from their loan servicers about qualifying and fewer than two percent of applicants had their loans discharged by late 2018. “It became clear in recent years that loan servicers had told public-servant borrowers that they were doing everything right even when they were in the wrong kind of loan or payment plan,” wrote Ron Lieber in The New York Times.” In 2018, data from the Department of Education show that 99 percent of applications for loan forgiveness have been denied.
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“It was bad enough. . .when the Education Department, in a legal filing, informed the nation’s public servants that they shouldn’t trust its administrator’s word about whether their student loans qualify for its debt forgiveness program,” Lieber added. He was referencing thousands of approval letters sent by the administrator, FedLoan Servicing, and its claim that the letters were not binding and could be rescinded at any point. “This is one of the most complex programs ever concocted by Congress,” said Rohit Chopra, a commissioner of the Federal Trade Commission and previous assistant director of the CFPB. “So many people who are counting on getting some help are going to be flatly rejected on a technicality,” he added.
Biden And Student Loan Cancellation
Pressure has mounted on the Biden administration to act on student loans. Progressives have pushed the President to cancel up to $50,000 in loans per borrower, a call he has resisted. Instead, Biden has said he is open to cancelling $10,000 per borrower, but “he has repeatedly said that he would prefer that Congress enact student debt cancellation through legislation, rather than acting unilaterally via an executive order,” as Forbes senior contributor Adam Minsky noted.
The push by unions may be apt given Biden’s approach on student loans so far, which has been quite surgical. Instead of enacting broad-based forgiveness, the Biden administration has been targeted in his approach, including cancelling up to $1 billion in student loans for borrowers who were defrauded by for-profit schools. “Borrowers deserve a simplified and fair path to relief when they have been harmed by their institution’s misconduct,” Education Secretary Miguel Cardona said in a statement. “A close review of these claims and the associated evidence showed these borrowers have been harmed and we will grant them a fresh start from their debt.”
The Public Service Loan Forgiveness program is broken. The mismanaged program, coupled with the impact the coronavirus pandemic has had on public service front-line workers, makes the union effort to forgive student loans of individuals working in public service jobs appropriate. The push also fits with Biden’s targeted approach not only to student loan cancellation, but also stimulus more broadly.