More than half a million student loan borrowers working in public service are anxiously awaiting the federal government to fulfill its promise to wipe away significant portions of their remaining debt. But with some politicians targeting the federal program for elimination, lawsuits convoluting the process, and administrative issues confusing borrowers, the future of the program itself is unclear.
Since May, when President Donald Trump's fiscal year 2018 budget plan proposed eliminating the Public Service Loan Forgiveness (PSLF) Program entirely, current students, borrowers, advocates, and some higher education professionals have been increasingly questioning whether borrowers would ever see their debt forgiven. Under the program, which was created under former President George W. Bush in 2007, borrowers with federal student loans who work in qualifying public service occupations for 10 years and make 120 qualifying payments on their loans may have any remaining debt forgiven by the federal government – a transaction that also would not be counted as taxable income.
Critique of loan forgiveness in general, and specifically related to the PSLF program, is nothing new. The program has for many years been unpopular among certain groups of lawmakers and thought leaders in the policy community, who claim the benefits are ill-targeted, that the program would come at a heavy cost to taxpayers, and that borrowers could still receive forgiveness under other repayment plans. But tensions are running high now that Republicans have control of the White House, as well as both chambers of Congress. And although Trump's budget proposal is simply that – a proposal – it gives lawmakers a sort of menu of programs to choose from when looking to make a dent in federal spending.
"I think PSLF is probably the single most threatened federal student loan benefit right now," says Ben Miller, senior director for postsecondary education at the Center for American Progress (CAP).
Right now, no funding bills moving through Congress have the program slated for elimination. But the situation could change quickly if lawmakers move forward with a budget reconciliation process.
Passing a budget resolution in the House would allow the Senate to then use the resolution as a vehicle to undergo "budget reconciliation." This process is a parliamentary tool to allow the Senate to get around the 60-vote threshold needed to pass legislation by instead requiring only a simple majority to pass the attached legislation. Republicans may attempt to use the House fiscal year 2018 budget resolution to pass comprehensive tax reform legislation. The fiscal year 2017 budget resolution, for example, was intended to be used as the vehicle to repeal and replace the Affordable Care Act, often referred to as Obamacare, which Congress has as yet been unable to achieve.
To pay for the cost of changes in the tax code, the House 2018 budget resolution includes a directive to the House Education and the Workforce Committee to find $20 billion in savings over 10 years. The Congressional Budget Office estimated the elimination of PSLF for new borrowers could generate $23.7 billion in savings over 10 years. The Committee for a Responsible Federal Budget outlined several ways the committee could achieve those savings, including increasing origination fees for undergraduates from 1 percent to 4 percent, eliminating subsidized loans, eliminating PSLF, and consolidating the income-driven repayment plans.
A number of changes to the student aid programs have occurred through the budget reconciliation process in years past. Most notably, in 2010, Democrats used budget reconciliation to pass the Student Aid and Fiscal Responsibility Act (SAFRA) which mandated the switch from FFELP to Direct Loans and indexed the Pell Grant maximum award to inflation.
"If Congress ends up having reconciliation instructions, PSLF is a very logical place to achieve the savings the education committees might need to achieve," Miller says. And because Republicans have control of both the House and Senate, "it's imminently doable," Miller adds.
Still, it appears not all Republicans are on board to dismantle the program.
Earlier this month, a bipartisan team of lawmakers – Reps. Ryan Costello (R-PA) and Brendan Boyle (D-PA) – formed a PSLF Caucus aimed at preserving the program for future borrowers.
"It's an important program, and we need to make sure we fulfill the promise that was made to the student loan debt that will be due and owing if we don't honor that commitment," Costello says. "Teachers, first responders, public health specialists, prosecutors – they make a difference in our local communities, and the program is intended to encourage folks that would otherwise maybe not pursue that career to do so."
According to Costello, many lawmakers may not even realize the program could be on the chopping block, so raising awareness about the program and generating bipartisan support are two priorities for the caucus.
"I have a sense of certain types of members that might look upon this favorably on the Republican side of the aisle," Costello says.
Still, he too warned about the potential impact a reconciliation process could have.
"These appropriations bills, particularly these big omnibus-type bills, you just can't predict what's going to happen," he says. "That's why we're creating the caucus now. As we move into September, time is of the essence. It's going to be subject to debate very quickly."
Others, though, have said a "wait-and-see" approach might be more appropriate, as Congress has many other tasks on its plate ahead of any education reform.
"I don't get the sense that education generally is very high on the list of priorities for anyone in Washington right now," says Neal McCluskey, director of the Center for Educational Freedom at the Cato Institute. "It's been health care, and Charlottesville. At some point, though, there will be a tax proposal put forth. And those things seem to be sucking up all the energy."
With that said, however, McCluskey says it's unlikely that Trump's proposal to wipe out the program would move forward.
"I would be shocked if a Trump proposal to get rid of PSLF made any progress in Congress," McCluskey says. "I don't get the sense there's any strong feeling that any student aid program should be eliminated."
Outside of making changes to the program through the budgeting process, the next option for Congress would be through the reauthorization of the Higher Education Act – an overdue task that's been looming over lawmakers' heads for some time, but still unlikely to happen in the near future. But that hasn't prevented think tanks, researchers, and others from developing ideas for how to potentially tweak the program, either by narrowing the types of eligible professions for forgiveness, or putting a cap on the amount of debt that can be forgiven.
McCluskey says that while making changes to eligible occupations would be "an incremental move in the right direction," he says it's not enough, and that scrapping PSLF would be better.
"I don't think we should be privileging nonprofit work or government work over working for for-profit operations," he says. "The assumption seems to be that there's something more valuable to society to working for the government, and I don't think there is."
Beyond the philosophical opposition to the program, McCluskey says programs like PSLF, and student loans in general have a "perverse effect of encouraging people to over-consume higher education" and that the programs enable colleges and universities to continue raising their tuitions and fees. Any changes to PSLF or other student aid programs, though, could not happen immediately. "You need to give the system a chance to adjust," McCluskey says.
Indeed, even Trump's budget proposal gives the impression that the elimination of PSLF would only apply to future borrowers, and that those already on track to receive forgiveness would still be eligible.
But as of late, some borrowers have been taking issue with the Department of Education's (ED) process for tracking their progress toward forgiveness eligibility, and recent actions from the department have cast doubt on borrowers' prospects.
Four individual lawyers joined by the American Bar Association (ABA) in December sued ED after the agency retroactively told the borrowers their employers did not meet PSLF requirements. The lawyers had submitted Employment Certification Forms that were previously approved by FedLoan Servicing, the company that handles PSLF loans, signaling they were on track to receive loan forgiveness. And recent court filings from ED have given the impression that borrowers cannot rely on FedLoan Servicing to guarantee whether they qualify.
A spokeswoman for ED did not respond to repeated requests for comment for this story.
Hilarie Bass, president of the ABA said the association sued ED to ensure it "keeps the promise it made to young people who dedicated themselves to public service."
"The plaintiffs have done their part: They work in jobs that serve the public, and they have been faithfully paying back loans after receiving the government's assurances that they would qualify for forgiveness on the remainder of their debts after 10 years," Bass said in an emailed statement. "When it became clear the government had misled them, the ABA stepped in to protect these individuals."
Bass said the association will continue to advocate on behalf of borrowers and the program, and to convince Congress of its importance.
"Without the PSLF, fewer young lawyers could afford to work as prosecutors, public defenders, city and county attorneys, or for nonprofit organizations that help the vulnerable in our communities," Bass said.
The full implications of the outcome of the ABA's lawsuit are still unclear. Depending on how a final decision is written, a result in favor of ED could either apply to a smaller bucket of PSLF borrowers – those working for a non-501(c)(3) nonprofit organization – or to a broader group of borrowers.
But the lawsuit also hints at some potentially larger concerns for the program in the future.
As it stands, there is no official requirement for borrowers seeking forgiveness under PSLF to file Employment Certification Forms (ECFs) each year to track their progress. Although the use is encouraged, these forms exist for borrowers to use voluntarily. Technically speaking, borrowers do not have to submit any type of form until they actually apply for forgiveness after 10 years or after making 120 qualifying payments. The bookkeeping system – or lack thereof – raises a few important questions, according to CAP's Miller.
For one, federal records attempting to track the number of borrowers applying for forgiveness could actually be underestimating the true number because the ECFs are not required. On the other hand, federal records could be overestimating the number if borrowers submit ECFs and leave their public service jobs.
"At some point, if people have not been filling out that form, there's going to be some sort of reckoning," Miller says.
And those who do fill out an ECF are relying on their servicer – presumably FedLoan Servicing – to accurately tell them whether their employer is eligible and generally whether they're on track for forgiveness.
"The thing I'm most worried about," Miller says, "is the proper accounting of payment history if and when people start asking for forgiveness."
Still, it may be safe to assume that any changes to the program would only affect new borrowers, according to Megan Coval, vice president for policy and federal relations at NASFAA.
"Although the PSLF program itself is in a precarious position at the moment, stripping away promised benefits for current borrowers would be a politically risky move for lawmakers," Coval says. "Moving forward, it will be important for policymakers, higher education leaders, and officials at ED to work together to ensure a smooth application process for borrowers eligible for forgiveness."
Publication Date: 8/29/2017