Our support for these jobs and the people who choose them for the benefit of society speaks volumes to our priorities. Getting rid of PSLF would no longer provide a pathway for those who are willing to take less pay for the good of the communities they serve. Those who are passionate about helping still have to put food on the table and support their families.
It doesn’t have to be an either-or situation. It’s possible to reform the PSLF program so that it isn’t as expensive, but still helps those who need it most. An Obama Administration proposal was to cap forgiveness at $57,500. It was never adopted, but a Congressional Budget Office analysis indicated that capping the benefit for PSLF could save $6.7 billion compared to current cost projections.
Because most borrowers graduate with less than $40,000 in debt, they could still benefit from the PSLF program with this change. Borrowers who graduate with balances greater than the $57,500 cap may still have their full balance paid off as many would pay down their balances over the 10-year repayment period prior to receiving forgiveness.
Additionally, it’s important to make sure the borrowers who need this program the most have access. Borrowers in high-paying fields are less likely to need PSLF, but they are also more likely to drive costs and the budget up with six-figure student loan debt.
The Brookings Institute authors created an additional analysis through New America that included a lawyer as an example. The lawyer could start at $59,000, but make $121,000 annually at the end of 10 years. That lawyer would have $147,000 forgiven in loans tax-free (after making $49,000 in payments over 10 years under income-driven repayment). Capping the forgiveness at $57,500 would still provide a benefit to the lawyer for working in the public sector, but at the same time would also save taxpayers $89,500.
So we want to preserve access to lower-income professions, like teachers and social workers. The New America analysis also looks at a K-12 teacher starting at $35,000 a year and making $56,000 by the end of 10 years.
They would typically repay $16,000 under income-driven repayment over 10 years. The forgiveness amount would be $41,000. This would still allow the teacher, who has greater need, to have their loan forgiven.
PSLF provides communities all over the country with talented workers — and we all benefit from this. Whatever is decided with regard to the budget, it’s vital that we consider the fact that investing in our people will likely provide a solid ROI.
Commentary by Andrew Josuweit, CEO of Student Loan Hero, a company that combines easy-to-use tools with financial education to help millions of Americans living with student loan debt. Follow him on Twitter @josablack.
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