Few To Benefit From Public Service Loan Forgiveness (PSLF) Program

Back in 2008, I wrote a quite critical rundown of the College Cost Reduction and Access Act of 2007 noting that, in a nutshell, it comes nowhere near addressing the astronomically rising costs of attending college.

I'll also note that the student loan experience is personal for me, as well. I'm the first in my immediate family to have received a 4-year college degree and had zero financial assistance from my family in doing so. Almost two decades after attending college and grad school, I'm still making monthly payments on my student loans.

The College Cost Reduction and Access Act included a benefit for those who work in public service. To summarize, someone who makes monthly payments, while on the correct payment plan, for 10 years while working in full-time public service as defined by the US Department of Education, can have the balance of their federal loans forgiven.

In 2008, I noted:

"In addition, your loans must be what are called federal 'Direct Loans' held by the Department of Education. Private loans, which have higher interest rates than federal loans, are not eligible for forgiveness....

In addition, this provision does nothing to reward those who have already been working in public service. For people who, for instance, have been working at a nonprofit while paying down their loans for say the past 8 years, their years of public service for purposes of this loan forgiveness provision will still begin in 2007, just as a new graduate's will. Then after 120 payments beginning in 2007, any student loan debt that is remaining will be forgiven."

I knew then that it would be difficult for many people to remain eligible for this benefit. For one, public service salaries tend to be much lower than private sector salaries, which means if someone is working in the public sector with a huge student loan debt, it can be difficult to make ends meet or to meet other life milestones a person might also want to meet, such as buying a house and/or starting a family.

Also, as detailed in an important Mother Jones piece (worth reading in its entirety), many borrowers run into barriers with federal loan administrators, who often make mistakes, give conflicting information, and miscount payments, but are rarely held accountable. So that now, the current situation is as follows:

"October 2017 should have been a moment for celebration for those sunk by debt—it was the first time a cohort of PSLF participants, after 10 years of payments, could be forgiven. Yet of almost 900,000 people who have submitted at least one payment to the PSLF program and FedLoan since 2012, the Education Department expects fewer than 1,000 to be forgiven by the end of its fiscal year. The reasons for these astonishingly dismal statistics are myriad, but one fact is clear: A decade after McIlvaine and scores of others began paying into the program, many are only barely closer to their goal of being debt-free. And some are even more in debt than when they started."

Despite how difficult it already is for borrowers to benefit from the PSLF, the Trump Republican Administration wants to get rid of it.

As the Mother Jones piece details, Republican policy around tuition is grounded in a philosophy wherein college students have a "personal responsibility" to assume the risk of taking on massive debt for a college degree.

All in all, it's a real win for Jill Stein voters in the 2016 election. She trashed Donald Trump's opponent for months and promised the cancellation of student debt altogether, so now nobody's getting anything even remotely close to that!

Statistics of the Day

Paul Campos continues to write about the law school scam. This time, in Salon:

"Approximately half of the 45,000 people who will graduate this year from ABA-accredited law schools will never find jobs as lawyers. (The Bureau of Labor Statistics estimates that over the next decade 21,000 new jobs for lawyers will become available each year, via growth and outflow from the profession.) 

Most of those who do find jobs will be making between $30,000 and $60,000 per year. People currently in law school are going to graduate with an average of $150,000 of educational debt. 

This debt will have an average interest rate of 7.5 percent, meaning the typical graduate will be accruing nearly $1,000 per month in interest upon graduation. Unlike almost every other form of debt, these loans cannot be discharged in bankruptcy."

Ouch.


Related: On the Law School Scam

But Bootstraps!

From The New York Times, this one hits close to home for me. In an article entitled "Top Colleges, Largely For the Elite," David Leonhart writes:

"Does more economic diversity [in elite universities] necessarily mean lower admissions standards?

No, it does not.

The truth is that many of the most capable low- and middle-income students attend community colleges or less selective four-year colleges close to their home. Doing so makes them less likely to graduate from college at all, research has shown. Incredibly, only 44 percent of low-income high school seniors with high standardized test scores enroll in a four-year college, according to a Century Foundation report —compared with about 50 percent of high-income seniors who have average test scores....

Well-off students often receive SAT coaching and take the test more than once, Mr. Marx notes, and top colleges reward them for doing both. Colleges also reward students for overseas travel and elaborate community service projects. 'Colleges don’t recognize, in the same way, if you work at the neighborhood 7-Eleven to support your family,' he adds.

Several years ago, William Bowen, a former president of Princeton, and two other researchers found that top colleges gave no admissions advantage to low-income students, despite claims to the contrary. Children of alumni received an advantage. Minorities (except Asians) and athletes received an even bigger advantage. But all else equal, a low-income applicant was no more likely to get in than a high-income applicant with the same SAT score. It’s pretty hard to call that meritocracy."

This is one reason why, in general, I tend not to be impressed by those with Ivy League pedigrees. Even though the US has a running narrative that there's something Really Special about people who graduate from the elite universities, the graduates of these schools are remarkably uniform with respect to the economic and class privileges with which they grew up.

As a high school junior in a rural working class town many years ago, I scored in the 99th percentile on the ACT while studying on my own, during my lunch breaks at Fast Food Restaurant. I applied to one elite university and got in, but even with a financial aid package couldn't afford the out-of-pocket costs to attend. Instead, like many of my classmates, I opted for a community college. That's just what people did. Going somewhere "better" wasn't an expectation for most of us. After two years, I then transfered to Pretentious University (PU) with an academic scholarship.

I can't say I fit in very well.

My introduction to PU was overhearing a fellow student say, "I don't understand why people's parents don't just pay the full four years of tuition at once, since it ends up being cheaper that way." One 20-year-old had a sports car with the license plate "CEO 2 B." Another student was dating the offspring of Famous Politician. Because doesn't everyone just hang out in those circles?

Yes, I was surrounded by rich kids who were convinced that their attendance at PU proved that they were the nation's Best and Brightest, the creme de la creme, entitled and blissfully unaware of the fact that for every one of them, there were dozens of other equally bright (or brighter) students at state universities, community colleges, or in the working world who didn't want to incur student loan debt, didn't have parents who could pay their six-figure tuitions, and/or didn't have much guidance or coaching on the whole Going To College Process.

Another interesting point from the Times article that I wanted to delve into a little more was the "Minorities (except Asians) and athletes receive an even bigger advantage" than low-income students as it seems to sloppily assume that minorities and low-income students are two separate (rather than overlapping) categories. I went to the Century Foundation report (PDF) cited in the article for a closer look:

"Many believe that race no longer matters, and that socioeconomic disadvantages, otherwise known as class, have become the universal barrier to equal opportunity. Our analysis of the NELS does not support the notion that we could use income or other socioeconomic characteristics as a substitute for race. Race and ethnicity have effects all their own, and we find that socioeconomic status is no substitute for race or ethnicity in selective college admissions."

That is, class differences don't "explain away" race-based differences in educational attainment. The report found that the "educational disadvantages of low socioeconomic status are more onerous for minorities, especially African-Americans."

Interestingly, gender wasn't examined with respect to educational differences.

College Cost Reduction and Access Act Updates

A while ago, I wrote about the College Cost Reduction and Access Act (CCRA). Due to recent developments, here is an update:


1. Re-Consolidating into the federal Direct Program

Part of my original critique of the CCRA was that, although graduates working in public service may have their loans forgiven after 10 years of making payments, the only loans eligible for this benefit are federal Direct loans. One problem with this provision is that many graduates hold other types of student loans, such as loans from private companies that usually charge much higher interest rates, that are not eligible for forgiveness. Another problem is that, prior to the CCRA, many graduates had already consolidated their federal loans out of the federal Direct program- thus rendering themselves ineligible for the loan forgiveness program.

However, as of July 1, 2008 borrowers have the right to re-consolidate their federal loans into the federal Direct consolidation program. Thus, those who had already consolidated their federal loans into a non-Direct program can now qualify for public service forgiveness if they meet the other requirements of the program.

Now, on July 1, I certainly didn't get a letter from Sallie Mae (or the Department of Education for that matter) informing me of my right to re-consolidate into the Federal Direct loan program, but alas. Apparently we do have that right. I'm sure glad I'm on top of these things. Kudos to organizations like the Project on Student Debt who keep us abreast of these intricacies.

I'm going to fill out an application, send it to the bureaucracy that is the Department of Education, and see what happens. If I run into hassles I will certainly blog about it.


2. What is Public Service?

Another part of my critique was that the definition for "public service" is vague and very broad. What this means is that graduates are in the dark as to whether or not their employment will end up qualifying as "public service" at the end of their 10 years of service. The proposed regulations to "clarify" this section of the law will basically require graduates to verify that they've worked in qualifying public service for 10 years, submit this verification to the Department of Education, and "hope for the best."

The Project on Student Debt has an action alert out requesting the Department of Education to:

"Please fix this problem by developing a system that lets borrowers confirm and track their eligibility for this form of loan forgiveness, so that they have a clear incentive to enter and continue in public service, and a sense of security while doing such important work."

If this is something you think is important, sign on.

My Take on the College Cost Reduction and Access Act of 2007

Back when I still believed the government was serious about addressing the rising cost of higher education and inequalities with regard to access, I received an email update regarding the College Cost Reduction and Access Act of 2007. "Finally," I thought, "a law that might help people attend college!"

I read through the law, I read the summaries, and I read updates from nonprofits whose very job is supposedly to protect and advocate student/debtor interests. About the law, I saw buzz phrases and soundbites like how the law was going to "strengthen the middle class by making college more affordable" and "encourage and reward public service."

Okay.

The only question I have after all this is why is this law being so highly touted? It comes nowhere near to addressing the roots of our current "cost of higher education" crisis.

That's why I'm going to go beyond the catchy soundbites and examine the claims versus the reality of the House Committee on Education and Labor.


1. "Strengthen the Middle Class by Making College More Affordable"

One of the boldest and most appealing political claims about the College Cost Reduction Act is that it purports to make college more affordable.

How does the law "make college more affordable"? By cutting interest rates on loans that you have to take out to pay un-affordable college costs and tuition.

In other words, the cost of college will remain unaffordable, tuition will continue to rise, and 18-year-olds who don't have the luxury of thousands of dollars on hand to pay tuition will "get to" continue paying for college with student loans. It's just that now these students will pay less interest for doing so- that is, they will have to buy less money to borrow money for college from now on.

This lower interest rate applies only to federal loans.

In what universe does "not making college more affordable" suddenly mean "making college more affordable"?


2. "Increase the Purchasing Power of the Pell Grant Scholarship"

For those who aren't familiar, the Pell Grant is a small need-based grant that low-income college students can get. First off, the purchasing power of the Pell Grant is relatively small. In 2006, the maximum Pell Grant that the poorest of the poor students received to pay for one year of college was $4,050. The College Cost Reduction Act will increase this maximum amount to $5,400, over the course of the next five years.

Okay, let's be realistic here. The $4,000-5,000 is free money, and that's good. But at the same time, the average cost [PDF document] of attending a public university is $12,796 and at a private university is $30,367.

From my own experience, I received a Pell Grant all four years of college and, despite receiving a large academic scholarship, I still left undergraduate with a relatively hefty debt load. Of course, in my stubborn insistence for my low socioeconomic status growing up not to be a barrier to attending an "elite" university, I made what I now recognize to be a financially unwise decision to attend an overpriced private school. That experience of being a poor student surrounded by relatively wealthy elites who have the privilege of bragging about various European [insert foreign country] adventures and taking for granted that their parents can and will pay for their college is, I suppose, a whole other blog topic.

My point here is that Pell Grants don't really offer much incentive for poor kids to feel as though any university door is open to them, even if they are qualified to attend that college. In addition, as the Department of Education notes, only students with family incomes below $45,000 are eligible for a Pell Grant, with most grants going to those with family incomes below $20,000. And, students coming from families with a combined "lavish" income of $45,000/year would be eligible for the lowest Pell Grant amount of about $400/year.

In sum, the purchasing power of the Pell Grant is low and will continue to be pretty low even after this increase. Secondly, many students whose parents are far from wealthy are not eligible for Pell Grants and must finance their educations with some combination of scholarships, student loans, and credit cards. Rather than addressing the root causes of always-rising college costs and the higher education "business," a society of two unequal classes is maintained: a class whose parents can and do write tuition checks versus a large class who must finagle some other way to pay for college.


3. "Encourage and Reward Public Service"

This one, too, hits pretty close to home for me as I have been working in the public sector for many years. The College Cost Reduction Act allows for someone's remaining federal student loans to be forgiven after 10 years in qualifying public service work.

Exploring this benefit a little more deeply, we find that this provision has many limitations.

In order to qualify for debt forgiveness one has to have made 120 student loan payments on or after October 2007. Fair enough. But basically, you have to work in relatively low-paying public sector while paying down your loans for 10 years. Those who graduate with high debt burdens will clearly benefit over those who graduate with lower debt burdens- as those with lower debt can perhaps pay off their debt within 10 years. So, to be more accurate, this provision really only rewards and encourages those with high debt and low incomes to work in public service.

In addition, your loans must be what are called federal "Direct Loans" held by the Department of Education. Private loans, which have higher interest rates than federal loans, are not eligible for forgiveness. And, federal loans that you have consolidated or that you will consolidate with non-"Direct Loan" consolidation companies are not eligible for forgiveness. I, for instance, consolidated my loans after graduating from law school and so I am not eligible for public service loan forgiveness at all. And, annoyingly, under current regulations, I am not allowed to "unconsolidate" my loans into the Direct Loan program. I suspect that many are in the same boat. [Update: Supposedly, during a one year window starting in July 2008 those in my boat will be allowed to re-consolidate their loans into the Direct Loan system. Let's see if that happens and how many hoops one has to jump through to do so.]

In addition, this provision does nothing to reward those who have already been working in public service. For people who, for instance, have been working at a nonprofit while paying down their loans for say the past 8 years, their years of public service for purposes of this loan forgiveness provision will still begin in 2007, just as a new graduate's will. Then after 120 payments beginning in 2007, any student loan debt that is remaining will be forgiven.

Fun times.

On the plus side, the list of qualifying public service jobs appears pretty broad and perhaps covers anyone working at a nonprofit organization. But those details haven't been challenged or significantly addressed yet.



So, that's my summary of the College Cost Reduction and Access Act of 2007. There are additional provisions I would have liked to discuss, but in the interest of not boring you I limited myself to the above three. My goal here was to provide a different view on the bill as it has been, I believe, wrongly portrayed as a huge benefit to the lower and middle classes. As the Law Career Blog humorously notes:

"It has been hailed by the House of Representative's Education and Labor Committee as 'the single largest investment in higher education since the GI Bill.' Interestingly, a separate press release from that committee explains that this 'investment' actually comes 'at no new cost to taxpayers.' A cynical soul might point out that this is not so much an "investment" as is it a "cost reallocation'...."

Yes. Perhaps I'm a cynical soul but I think this bill is extremely overrated. It fails to address class inequalities with respect to higher education while simultaneously ignoring the powerful and unaccountable student loan industry. Ironically, that the law is greatly hailed by the media, colleges, and politicians appeases lower and middle-class families who cannot afford college even though the law really doesn't do much for these families.