NASFAA Task Force Encourages Continuation, Modification of PSLF Program
By Brittany Hackett, Communications Staff
The Public Service Loan Forgiveness (PSLF) Program should continue to be available to student loan borrowers with some modifications to improve and strengthen the program, NASFAA’s PSLF Task Force says in its final report.
The program was established in 2007 to encourage student borrowers to work in the public sector. Under PSLF, qualifying borrowers may have their Direct Loans forgiven after 10 years of full-time service in an eligible job. In recent years the program has received scrutiny for its broad eligibility categories, and the potential for overborrowing.
The task force was convened in spring 2014 to develop recommendations to improve and strengthen PSLF and to ensure the program’s long-term viability. Comprised of a geographically diverse group of financial aid professionals from all types of postsecondary institutions, the task force placed particular emphasis on institutions serving graduate and professional students.
NASFAA’s Board for Directors in June accepted and endorsed the task force’s final recommendations.
“PSLF offers an important incentive for borrowers to enter into lower-paying public service work,” NASFAA President Justin Draeger said in a press release. “However, in recent years policymakers have expressed concern about the potential for some borrowers to receive loan forgiveness despite earning a substantial income. It is vital to the program’s long-term sustainability that we take steps to ensure the integrity of the program.”
The task force’s recommendations are as follows:
- Continue the Public Service Loan Forgiveness Program
- Retain the Eligibility Criteria to Qualify for Public Service Loan Forgiveness. In the absence of good data about the potential participation in PSLF, the definitions of qualifying full-time work, qualifying employment, qualifying monthly payments, qualifying loan types, and length of service should remain unchanged.
- Institute Limits on the Amount of Forgiveness. Allow forgiveness of up to 100 percent of a qualifying loan balance that does not exceed the independent undergraduate aggregate Stafford Loan limit (currently $57,500) and allow additional forgiveness of 50 percent of any remaining qualifying loan balance, conditioned that total forgiveness cannot exceed the graduate aggregate Stafford Loan limit (currently $138,500). Additionally, borrowers with a balance remaining after receiving PSLF should be allowed to continue utilizing an income-based repayment plan to pay their remaining balance, and potentially could qualify for additional loan forgiveness under that plan.
- Keep Public Service Loan Forgiveness Untaxed. Taxing borrowers on the amount of forgiveness received is counterintuitive, as it both provides a disincentive for high-debt borrowers to take advantage of the program and creates a sudden financial hardship for borrowers receiving forgiveness.
- Make Public Service Loan Forgiveness Program Data Public. The designated PSLF servicer should make public PSLF data, to allow interested constituencies the opportunity to more accurately evaluate the program, its effectiveness as an incentive to pursue public service work, and its cost.
- Strongly Encourage Annual Submission of Employment Certification Forms. Annual form completion would ensure that the designated PSLF servicer could monitor an eligible borrower’s repayment and employment.
- Increase Communication about Public Service Loan Forgiveness. PSLF should be more widely publicized by the Department of Education and the loan servicers as an incentive for borrowers and those considering enrollment in higher education to enter public service work.
The report and recommendations within will be utilized in NASFAA’s reauthorization efforts. Visit NASFAA’s Higher Education Act Reauthorization web center to find in-depth analyses from NASFAA staff on key proposals set forth by the U.S. Senate and U.S. House of Representatives.
Publication Date: 7/31/2014