Student Loans Are Too Expensive To Forgive
Late last year, graduate students watched as legislators in the House debated giving them a hefty new tax bill: A version of the GOP tax plan proposed to treat tuition waivers as taxable income. Although that plan was later dropped, Congress is once again considering legislation that could affect graduate students’ bottom lines.
President Trump’s Education Department and its inspector general, as well as lawmakers and think tanks of all ideological stripes, have raised concerns about the growing cost of the federal government’s student loan programs — specifically its loan forgiveness options for graduate students. Members of both chambers of Congress have said they are committed to passing new higher education legislation this year that will include changes to these programs.
Under the Public Service Loan Forgiveness Program, however, a student’s debt can be forgiven after just 10 years
The $1.3 trillion spending package just signed by President Trump does include some wins for the Public Service Loan Forgiveness Program in the short-term.
The costs of the suite of plans currently offered by the government to lessen the burden of grad school debt has ballooned faster than anticipated, and the federal government stands to lose bundles of money. A new audit from the Department of Education’s inspector general found that between fiscal years 2011 and 2015, the cost of programs that allow student borrowers to repay their federal loans at a rate proportional to their income shot up from $1.4 billion to $11.5 billion. Back in 2007, when many such programs launched, the Congressional Budget Office projected they would cost just $4 billion over the 10 years ending in 2017.
The cost of the loan forgiveness programs exploded, in part, because policymakers did not correctly estimate the number of students who would take advantage of such programs, according to higher education scholar Jason Delisle. Now there’s an emerging consensus that some programs should be reined in, but ideas on how much and in what ways vary by party affiliation. Senate Democrats just introduced a college affordability bill that focuses on creating debt-free college plans by giving federal matching funds to states that, in turn, would figure out ways to help students pay for school. In the past, President Barack Obama acknowledged the need to require borrowers to repay more of their debts and made some proposals for modifying the programs’ rules. The GOP goes much further in its suggestions: A new proposal from House Republicans would eliminate some loan-forgiveness programs entirely.
The federal government currently offers several types of loans, with varying repayment terms, one of which can cover up to the full cost of a student’s graduate program. If, after they leave school, a borrower signs up for an income-driven repayment plan, they will pay back their loan at the rate of 10 percent of their discretionary income
Definitions of discretionary income vary somewhat, but for the purposes of federal loan repayment, the government calculates it as any money a person earns above the poverty level for their circumstances, using either 100 percent or 150 percent of the poverty line as a guide.
The program was created to ease economic barriers to entering public service, which is defined as work for any federal, state, local or tribal agency, or any tax-exempt nonprofit.
And the federal government is considering ending some of its student loan forgiveness programs, which could raise the economic barrier to entering certain public service professions and leave social workers, teachers and other people in public-service fields that require graduate degrees paying thousands of dollars more for their education
There are a few exceptions for non-tax-exempt nonprofits that provide qualifying public services, such as public libraries and emergency management services. Work for labor unions and partisan organizations is not eligible.