Oct. 22, 2015
Emily Best is a 32-year old Pennsylvania farmer who wants a little help from the federal government. As reported in MartketWatch, Best believes that the work she does should qualify her for an extremely generous federal program that allows student loan borrowers who work in public service jobs to pay an affordable percentage of their income for ten years and then have the rest of their student loan debt forgiven. In making the argument, Best has highlighted the fundamental problem with the Public Service Loan Forgiveness program (PSLF). As a society, we cannot agree on what constitutes public service, and designing a loan forgiveness program around such a concept is doomed.
IBR already makes payments affordable
There are two distinct provisions in the federal student loan program that could help Best. The first is Income-Based Repayment, where borrowers pay anywhere between zero and ten percent of their income towards their loan, and after twenty years, any remaining balance is forgiven. Then there is PSLF, where borrowers enroll in IBR, but if they work for the government (federal, state, local, or tribal) or a 501(c)(3) nonprofit for 10 years can have all of their debt forgiven tax free. Both the Consumer Protection Bureau and the Government Accountability Office independently estimate that about 25 percent of U.S. workers are employed at qualifying public service organizations.
Best is already enrolled in a version of IBR. She has free room and board, but makes a low income of $1,600 a month, which means her monthly payment is already zero dollars. PSLF isn't, and never has been, about affordability. It's about desert. Best thinks she deserves to have her loans forgiven after only ten years because she is providing a public service... she's growing the food that feeds America.
The fatal flaw of PSLF is that nearly anyone can make the argument that she is performing a public service.
In fact, Best makes a compelling case that she is providing a public service, far more than some accountant working for a random federal agency who currently qualifies. The fatal flaw of PSLF, and the concept of public service in general, is that nearly anyone can make the argument that she is performing a public service.
Consider a nurse working at a for-profit hospital. Despite performing the exact same functions for a similar level of pay and undoubtedly providing a "public service" of taking care of the sick, he does not qualify for PSLF, while his colleague at a non-profit hospital does. That's clearly unfair, as all nurses should qualify for PSLF. Perhaps, then, not just nurses, but anyone directly serving patients at the hospital, including doctors, should qualify, even if she will eventually become very wealthy. What about the accountants and IT managers at the hospital? Their colleagues at the non-profit hospital across the street get PSLF. They perform the same functions and both work for organizations whose mission is to care for the sick. Perhaps anyone working for any hospital, for-profit or non-profit, should get PSLF. That seems eminently fair, since they all work for an organization fulfilling a public service.
And what if the only reason the non-profit hospital across the street has the new cancer center was a result of a successful bond sale that the brilliant Goldman Sachs analyst correctly priced and sold on the municipal bond market. And shouldn’t that Goldman Sachs analyst, who only works municipal bond sales, meaning that, by definition, she only helps raise capital for government and non-profit entities, receive PSLF too? Without her there would be less capital for the hospital to build the new cancer center.
This argument also applies to the entire defense industry, without whose missiles and planes and tanks we would not be able to defend our country. All of those workers, too are clearly working in the public service.
Who isn't working in the service of the public?
So yes, Best certainly is performing a public service. And so is the truck driver delivering his food to the grocery store, and the grocery store clerk, selling me my food. So too is the parent without any paid job, taking care of a child at home. Children, after all, are the future. The question for Best, and the government, is who isn't working in the service of the public?"