The Public Service Loan Forgiveness Program: The Best Option for Student borrowers With Six-Figure Debt
A few years ago, law professor Paul Campos wrote an advice book for people thinking about going to law school. If you borrow a lot of money to go to a second- or third-tier law school and graduate in the bottom half of your class, Campos warned, you probably won’t make enough money to pay back your loans.
In such event, Campos advised, your only viable option is to get a job in the public sector and enroll in the Public Service Loan Forgiveness Program (PSLF). If you go that route, you will make monthly payments on your student loans for ten years based on a percentage of your income. When you’ve made 120 payments, the balance of your loan debt will be forgiven.
Campos’s advice is good for anyone who is buried by student loans. If you racked up $100,000 or more in student loans and can’t find a good job in the private sector, the PSLF program may be your only viable option. It is the financial equivalent of the last train out of Paris in the movie Casa Blanca. If Rick doesn’t get on that train before the Nazis arrive, he’s doomed.
The Department of Education Fumbles the PSLF Program: Is Betsy DeVos Out of Her Element?
Congress created the PSLF program in 2007, and the Department of Education has been promoting it ever since. DOE has instructed PSLF participants to send their Employment Certification Forms (ECF) to FedLoan Servicing, DOE’s approved PSLF processor, on an annual basis to verify they are in fact employed by a public service organization. More than half a million people are enrolled in the PSLF program, confident that their indebtedness will be cancelled after 10 years of public service employment..
But now it seems DOE may be reneging on its PSLF obligations. The American Bar Association sued DOE for not living up to its PSLF commitments, and DOE recently answered that law suit. In essence, DOE denied it had any obligation to honor FedLoan Servicing’s decision to certify public service employment.
This is shocking. As Steve Rhode said in his blog about this development, “People who have worked ten years in jobs assuming their loans would be forgiven are potentially going to get some nasty surprises.”
I don’t know what to make of DOE’s response to the ABA’s lawsuit. If the PSLF program collapses, Betsy DeVos’s credibility as the Secretary of Education, already compromised by her ties to the for-profit industry, will be completely destroyed.
To paraphrase Walter Sobchak’s remark to Donny in The Big Lebowski, “Betsy, you may be out of your element.” DOE may come to its senses and straighten out the PSLF mess; in fact, I think that will probably happen. But the political consequences of this episode will reverberate for a long time.