Wednesday, May 24, 2017

Public Service Loan Forgiveness in the Administration’s Crosshairs By Jonathan D. Glater

 

It is just a few pages in the Trump Administration’s budget proposal, but to student borrowers and indebted graduates toiling in public interest jobs that they entered because they expected to have their loans forgiven, they are pages that matter.  The Administration wants to eliminate the Public Service Loan Forgiveness program (“PSLF”), which “unfairly favors some career choices over others and is complicated for borrowers to navigate,” in its entirety.

The full proposal is here and the quoted language comes from page 129.  This is not the first blow student borrowers expecting to count on PSLF have suffered – see this prior post – but way back last month, the Administration had not proposed complete shutdown.

But wait, there’s more.

The White House proposes elimination of multiple student loan repayment plans in favor of a single, income-linked plan under which borrowers would pay 12.5 percent of their discretionary income.  (This is from page 127.)  Any undergraduate debt remaining after 15 years of repayment would be forgiven; graduate debt, after 30 years.

Finally, the proposal would eliminate the federal subsidy that pays the interest on needy student borrowers’ loans while they are enrolled in school.  The proposal states:  “While the in-school interest subsidy has not been rigorously evaluated, lessons from behavioral economics indicate that the subsidy is less likely to increase postsecondary enrollment, due to the complexity of the interest rate benefit, than straightforward need-based grants to students.”  (Page 130.)

I confess I did not reach out to Cass Sunstein for comment on the lessons of behavioral economics, although I would be curious what his thoughts are.  It does seem plausible to claim that few students consider monthly interest payments on their loans when making enrollment decisions.  On the other hand, any federal subsidy that reduces overall indebtedness and so lowers the financial burden of higher education is a concrete, good thing.

What makes these changes so interesting is the way they muddle the purposes of federal student aid program.  I should say, muddle further, because since the G.I. Bill, the federal role in higher education finance has pursued multiple goals.  Some government programs aim to encourage students to pursue higher education who otherwise might not; some seek to encourage students to make career choices that serve the national community; and some states seek to reward students who have done well in primary and secondary school and might well have enrolled in college anyway.

The antipathy to PSLF is telling.  That program did not seek to confer an “unfair” advantage on those graduates who launched themselves on some random career path but to create an incentive for students to make choices beneficial to all of us, choices that otherwise would not be feasible.  Apparently in the view of the Trump Administration, choosing to pursue public service and accept low pay is no different, from a policy perspective, from choosing to pursue a lucrative private sector career. 

And that indifference to any distinction between public service and private wealth accumulation may be a hallmark of this Administration’s approach to education policy. 

http://lawprofessors.typepad.com/education_law/2017/05/public-service-loan-forgiveness-in-the-administrations-crosshairs-by-jonathan-d-glater.html

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