Student loan relief fails to forgive
Promises fall short due to red tape, bad advice
The Department of Education recently released a status report on its Public Service Loan Forgiveness Program, and the results are eye-popping. PSLF promises loan cancellations for borrowers who commit to 10 years of public service, and the first group of borrowers is finally eligible. According to the report, however, almost no one is getting relief: Of the 32,601 applications received by the end of June, only 96 borrowers have actually had their debt canceled. Ninety-nine percent of the applications that have been processed were denied.
As lawmakers explore new solutions to our nation’s student debt crisis and college affordability woes, PSLF should serve as a cautionary tale. The program’s outcomes are distressing, but they are not entirely shocking. At first glance, PSLF sounds simple and generous. But it was packed full of red tape and fine print that made it nearly impossible for borrowers to navigate — red tape that was compounded by inexcusably poor advice from loan servicers. For instance, many borrowers were unintentionally enrolled in the wrong repayment plan while completing their years of public service, rendering them ineligible for loan forgiveness.
To develop policies likely to gain bipartisan support, legislators look for “sensible solutions” with modest price tags. But this creates tension when it comes to finding meaningful answers to the high price of college and rising student debt. With 44 million student loan borrowers and more than $1.5 trillion in outstanding debt, those solutions don’t come cheap.
There is no magic math that allows legislators to concoct generous benefits for students and other borrowers at little to no cost. But there is math that can take a program aimed at providing a generous benefit, load it up with eligibility requirements, conditions and other fine print, and greatly minimize the program’s cost. The result is government programs that sound great at bill signing ceremonies and in policymakers’ news releases, but provide very little value when implemented.
PSLF is one example: It required that borrowers have the “right” kind of loan, enroll in the “right” repayment plan, work the “right” kind of job, and fill out the “right” kind of paperwork each year for 10 years to be eligible. It is not surprising that so few completed the correct steps to get what they were owed.
The TEACH Grant program is another. In its simplest design, the program aimed to provide grants to educate teachers to work in high-needs fields. Instead of simply offering a grant, however, Congress designed grants that turned into loans if recipients didn’t follow the highly specific teaching service requirements upon graduation. The result? More than 60 percent of TEACH grants convert to loans. In thousands of these cases, the conversion was the result of paperwork discrepancies and errors.
Instead of choosing to invest in solutions that help students and borrowers, it seems we are doomed to make the same mistakes all over again. For example, New York state has implemented a “free college” program that includes numerous conditions and catches, including provisions that would convert grants into loans or claw back the aid a student receives.
As federal and state governments debate new solutions to relieve student debt and decrease college prices, the public should bear in mind these examples. We should be wary of programs that promise big benefits at little cost, evaluating them for effectiveness rather than budgetary impact. We should recognize that elaborate eligibility criteria do not target benefits to those who are most “deserving” — they simply act as a roadblock for all applicants, regardless of their merit.
And we should be vigilant in ensuring that back-room processes do not erode good policies under the weight of fine print. Most of all, we should build bold programs that provide real value to American students and borrowers.
Julie Margetta Morgan is a fellow at the Roosevelt Institute and executive director of the Great Democracy Initiative. She previously served as senior education counsel to Sen. Elizabeth Warren and a senior program officer at the Bill & Melinda Gates Foundation.
STEVE SACK/(MINNEAPOLIS) STAR TRIBUNE/POLITICALCARTOONS.COM