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Trump's plan to cut this student loan program is a real shame

Students protesting budget cuts at UC Berkeley. (File photo).
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Students protesting budget cuts at UC Berkeley. (File photo).

Last week, we got a glimpse of the Trump administration's proposed budget cuts for the Department of Education. Among the programs facing the chopping block is Public Service Loan Forgiveness (PSLF), created in 2007 during George W. Bush's second term in office.

The idea is to scrap the PSLF program altogether — in the name of saving money. The estimated 552,931 borrowers hoping to receive student debt relief from PSLF would not be impacted by this proposal. However, PSLF would no longer be available to any new federal student loans borrowers as of July 1, 2018 and later.

Deficit hawks in Congress and the current administration might feel that PSLF is one easy way to trim the budget. Since PSLF was created by statute, the assumption is that Congress would need to formally end the program. This could be done as part of a budget bill or through some other means, such as voting to repeal PSLF.

Analysis by the Brookings Institute indicates that the median debt load of those enrolled in PSLF is more than $60,000. The total amount forgiven is likely to be billions of dollars. A Government Accountability Office report put the amount of student loan debt forgiven through income-driven repayment on student loans taken between 1995 and 2017 at about $108 billion. That same report also estimated that some projections for PSLF costs were under by about $4.4 billion.

But can we really place a price on the benefits to society PSLF opens up?

Education expert Mark Kantrowitz pointed out that PSLF is a way of allowing workers to follow their callings in public sector and non-profit jobs. It removes student loan debt as a disincentive for talented workers to pursue jobs as social workers, public defenders, teachers, and primary care medical professionals in rural areas.

"It doesn't have to be an either-or situation. It's possible to reform PSLF in a way that saves money and still provides an incentive for talented workers to accept lower pay in underserved communities."

Our support for these jobs and the people who choose them for the benefit of society speaks volumes to our priorities. Getting rid of PSLF would no longer provide a pathway for those who are willing to take less pay for the good of the communities they serve. Those who are passionate about helping still have to put food on the table and support their families.

It doesn't have to be an either-or situation. It's possible to reform the PSLF program so that it isn't as expensive, but still helps those who need it most. An Obama Administration proposal was to cap forgiveness at $57,500. It was never adopted, but a Congressional Budget Office analysis indicated that capping the benefit for PSLF could save $6.7 billion compared to current cost projections.

Because most borrowers graduate with less than $40,000 in debt, they could still benefit from the PSLF program with this change. Borrowers who graduate with balances greater than the $57,500 cap may still have their full balance paid off as many would pay down their balances over the 10-year repayment period prior to receiving forgiveness.

Additionally, it's important to make sure the borrowers who need this program the most have access. Borrowers in high-paying fields are less likely to need PSLF, but they are also more likely to drive costs and the budget up with six-figure student loan debt.

The Brookings Institute authors created an additional analysis through New America that included a lawyer as an example. The lawyer could start at $59,000, but make $121,000 annually at the end of 10 years. That lawyer would have $147,000 forgiven in loans tax-free (after making $49,000 in payments over 10 years under income-driven repayment). Capping the forgiveness at $57,500 would still provide a benefit to the lawyer for working in the public sector, but at the same time would also save taxpayers $89,500.

So we want to preserve access to lower-income professions, like teachers and social workers. The New America analysis also looks at a K-12 teacher starting at $35,000 a year and making $56,000 by the end of 10 years.

They would typically repay $16,000 under income-driven repayment over 10 years. The forgiveness amount would be $41,000. This would still allow the teacher, who has greater need, to have their loan forgiven.

PSLF provides communities all over the country with talented workers — and we all benefit from this. Whatever is decided with regard to the budget, it's vital that we consider the fact that investing in our people will likely provide a solid ROI.

Commentary by Andrew Josuweit, CEO of Student Loan Hero, a company that combines easy-to-use tools with financial education to help millions of Americans living with student loan debt. Follow him on Twitter @josablack.

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