Fixes Needed for Federal Program Promoting Public Service

In 2007, Congress created two new programs aimed at making it easier for students to repay their federal student loans and encouraging them to pursue careers in the public service. As we wrote yesterday, one of those programs — Income-Based Repayment — goes into effect today. The other one — Public Service Loan Forgiveness — is already up and running but may not live up to its full potential unless changes are made to the regulations governing it.

Under the loan forgiveness program, which Congress included in the College Cost Reduction and Access Act, the federal government will forgive the remaining debt of Direct Student Loan borrowers who have made 120 payments on their loans while working in a public service occupation. Borrowers with loans through the Federal Family Education Loan (FFEL) program can take advantage of this benefit by consolidating their debt into Direct Lending.

Lawmakers created the program in reaction to reports that student loan borrowers were increasingly shying away from pursuing public-service careers, such as teaching and social work, because of their heavy debt loads. By providing loan forgiveness, the bill’s authors hoped to provide incentives to college graduates to enter these fields and reward them for their service.

Sounds pretty straightforward, right? Unfortunately, the program is not operating in the way lawmakers envisioned. That’s because the U.S. Department of Education, under its previous leadership, decided to keep people in the dark about whether their chosen jobs qualify them for the benefit. Under regulations the Department issued in October, student loan borrowers will not know whether they qualify for the loan forgiveness until after they have made all 120 required payments.

Last year, at Higher Ed Watch, we questioned the Department’s decision — asking why borrowers working at low-paying jobs should have to face this type of uncertainty. We joined the Project on Student Debt in calling for the Department to develop a system that allows borrowers to confirm and track their eligibility over time for this benefit. But Department officials refused to budge, saying that tracking borrowers’ eligibility status would be “a costly and complex” undertaking. Maybe so, but doesn’t the Department have the obligation to carry out the will of Congress?

Now that there are new leaders at the Department, we would hope that they would revisit this regulation. They should make it a topic of the negotiated rulemaking sessions they plan to hold in the fall.

Our friends at the Institute for College Access and Success (TICAS), which runs the Project on Student Debt, have asked the Department to revise the rule to allow borrowers who have made at least 12 payments on their loans “request a confirmation of eligible payments and employment on a form provided by the [Education] Secretary.” [Disclosure: Higher Ed Watchis supported in part by TICAS.

“Giving borrowers clear information upfront, and periodic confirmation of how many more years of eligible work and payments are required before they qualify for forgiveness, will provide an incentive to continue in public service and ultimately meet the forgiveness requirements,” Pauline Abernathy, the acting director of policy and strategy at TICAS, recently wrote in testimony she provided the Department. “It will also reduce the number of borrowers applying to the Department for loan forgiveness before it is appropriate for them to do so.”

We wholeheartedly agree. Borrowers who devote themselves to public service should not be left in the dark about whether they qualify for help from this worthy program.