Let the PSLF Backlash Begin

The Public Service Loan Forgiveness program (PSLF), once a sacred cow among Democrats, has a problem. As reported in the Wall Street Journal, 40 percent of doctors now plan on pursuing the program. The "Doctors' Loophole," as the article called it, goes like this: Doctors graduate with astronomical levels of debt, but then make low incomes for their first eight years while they are in training. They enroll in Income-Based Repayment (IBR) which makes their payments for their first eight years very low, and even if they make higher incomes in their last two years, they still will see the vast majority of their loan forgiven after ten.

It's not that hard to get PSLF as a doctor, as 75 percent of hospitals in the country are government-run or nonprofits. After their training, doctors at those hospitals are some of the most highly paid professionals in the country. This subsidy is a clear giveaway to an elite group, and people are going to get angry about it. The American Medical Association, now realizing just how good of a deal this is for their membership, is now reportedly lobbying hard to keep the program as is.

Now what? Starting a few years ago, after some prodding, the Obama administration proposed capping the amount forgiven to just under $60,000. That will no longer suffice. Should a Republican win the presidential election, PSLF will almost certainly be on the chopping block. Even if Hillary wins, PSLF will be a prime target for modifications to the Higher Education Act in the Republican dominated Congress, and given how outrageous the benefits are to high-income borrowers with graduate and professional degrees, Democrats might not want to fight to save the "doctors' loophole."

After all, PSLF does not make monthly payments any more affordable. The speech pathologist that the AMA rolled out as an example of the effectiveness of the program would still have affordable monthly payments even without PSLF.

There was, perhaps, a time when PSLF could have been modified before high-income professionals began to exploit it. That time has passed. Democrats should eliminate PSLF before anger spreads over towards anger about the windfall benefits in IBR more broadly."