Inside the Magical World of PSLF

David Acevedo

CounterCurrent: Week of 10/17

Imagine the following scenario, if you will: You just finished your master’s degree, and in the process, you took on about $100,000 in student loans. Each month, you owe some three-figure amount, and sometimes, you pay it in full. Other times, you say, “Eh, I’ll just pay $1 this month.” On a few occasions, you pay the $1 and you send in the payment two weeks late. “Who’s really paying attention?” you ask yourself. You do this for 10 years, and then the rest of your debt is forgiven.

“Now hold on,” you may be thinking. “Is this the trailer for some new student debt-themed Disney movie? Who, pray tell, is this magical student loan provider that would do such a ludicrous thing? And how can I get in?” Good questions, dear reader. What if I told you that this is only a slightly fictionalized version of something that’s already happening? And that the magical loan provider is none other than the largest in the nation: the federal government?

That’s right. As of October 6, those eligible for the Public Service Loan Forgiveness program (PSLF) can more or less make the above daydream a reality, all thanks to new “emergency changes” announced by the U.S. Department of Education (more on those scare quotes in a bit).

But first, some background. The Education Department (ED) launched PSLF in 2007 in order to incentivize government and nonprofit sector employment. Under the program, those with student loan debt are eligible to have their debt forgiven after just 10 years of work for a qualified employer, while those outside PSLF’s domain would have to work 20 years for the same opportunity. As Andrew Gillen of the Texas Public Policy Foundation explains in this week’s featured article, this is “unfair on several levels.”

“PSLF treats similar people differently,” he writes. “For example, a nurse employed by a nonprofit university hospital is eligible for PSLF and therefore can have her loans forgiven after 10 years of repayment, while the same nurse that works for a for-profit hospital would need to repay for 20 years. That doesn’t make sense [emphasis mine].”

But at least there were some basic rules in place here. For example, PSLF-eligible workers needed to make 120 payments in full and on-time to qualify for loan forgiveness. Now, with ED’s updates to the program, neither of these are the case. As Gillen writes, 

We should be shutting PSLF down. Instead, the Biden administration is making it worse. … The old rules required a minimum of 120 on-time full payments to be eligible for forgiveness. Now, the Biden administration has waived “the requirement that payments be made in the full amount and on-time.” Would a one-cent payment made five years late count toward the required 120 payments? If so, that’s an Orwellian definition of “payment.”

What’s more, the “emergency” part of these supposed “emergency changes” is specious at best. The COVID-19 pandemic and the ensuing governmental response have without a doubt created financial hardship for many. But those in dire straits haven’t had to make loan payments anyway:

… the Department of Education has already paused all student loan payments until next year, meaning there is no conceivable case for this action being necessary due to an emergency. (And in another bizarre twist, debtors get to count the skipped payments toward the required 120 monthly payments. As ED helpfully explains, “You can think of them as $0 payments.”)

$0 payments, you say? Maybe we are living in a Disney movie after all. But this one, unlike Cinderella, won’t have a happy ending. There’s not a single private loan provider that could stay afloat with this business model. How does the federal government get away with it? Through your tax dollars, of course, and by taking just a few steps closer to $30 trillion in national debt. Let the good times roll!

All jokes aside, the new PSLF is even worse than the original, and it is utterly unsustainable. How long will these “emergency changes” last? And, more importantly, who will hold ED accountable for its wanton disregard of fiduciary responsibility?

CounterCurrent is the National Association of Scholars’ weekly newsletter, written by Communications & Research Associate David Acevedo. To subscribe, update your email preferences here.

Image: Quick PS, Public Domain

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