The Joe Biden administration has announced an overhaul of the government’s public-service loan forgiveness program, which would allow tens of thousands who work for government or nonprofits to discharge their loans ahead of schedule. The new policy aims to address flaws that have prevented borrowers from receiving relief they were originally promised. The administration means well, but wide-scale debt forgiveness is the wrong way to encourage students to pursue careers in public service.
Under the existing program, which Congress created in 2007, student-loan borrowers working for the government and in other nonprofit jobs can have their debts canceled if they’ve made monthly payments for at least 10 years. More than 1 million workers are potentially eligible, but their chances of realizing its full benefits are slim. Out of roughly 725,000 applicants since 2017, only 2% have had their loans discharged. Some had made the required number of payments but were nonetheless denied because of administrative errors. Others have been penalized for enrolling in federal loan programs that aren’t covered, or for making payments a few days late.
Earlier this month, the Department of Education took steps to fix the system. Borrowers denied for having the wrong type of loans or because of late payments or other technicalities will now qualify. The government will also allow members of the military, who can suspend their student-loan payments while on active duty, to count those months as credit toward full debt forgiveness. Starting next year, service members and federal employees will be automatically enrolled in PSLF instead of having to apply. Under the new rules, as many as 50,000 public-service workers could receive immediate relief, wiping out $4.5 billion in student-loan debt.
All this will help redeem the PSLF’s original commitment to public-sector workers. The trouble is, that original commitment was not well-judged. The government ought to revisit the basic principles and narrow the scope of the program.
