During Joe Biden’s presidency, American taxpayers bore the burden of hundreds of billions of dollars in student loan forgiveness — a costly decision that effectively shifted debt from college attendees to those who chose a different career path.
That scheme was unfair, fiscally irresponsible, and beyond the scope of executive authority.
Fortunately, President Donald Trump, Education Secretary Linda McMahon, and the US Congress largely ended it, but some student loan forgiveness lives on in the law.
That’s because of the Public Service Loan Forgiveness (PSLF) program created by Congress almost 20 years ago. PSLF permits borrowers who work in public service, such as nonprofits or government institutions, to have their unpaid student debt forgiven after just 10 years.
Demand for the program spiked significantly in recent years, costing the federal government almost $30 billion, according to data from the Office of Federal Student Aid. In fact, the average borrower stands to benefit from $78,000 in debt forgiveness at the end of the 10-year period. And with 2.5 million Americans eligible, this program could be quite expensive in the years ahead.
We should encourage more Americans to enter public service, but there are better ways than through a clunky subsidy program such as PSLF.
Ideally, Congress would terminate the program entirely for new borrowers because it is effectively a taxpayer-funded subsidy for college graduates. Doing so would save roughly $30 billion over the next decade. This is a sizable amount that can be leveraged for tax cuts, deficit reduction, or even enhancements to workforce development programs that teach in-demand skills.
Aside from the fiscal justification for reforming PSLF, there is a fairness rationale. Bailouts benefit a relatively privileged group of college graduates, many with advanced degrees, who chose to work in industries already known for greater job security and benefits. In essence, blue-collar truck drivers, electricians, and waitstaff — who may have never attended college — are helping to foot the bill for government bureaucrats who earned a college degree.
In today’s America, only about 38 percent of US adults hold a bachelor’s degree. That means a majority of taxpayers did not attend college at all, and yet they’re expected to pay for the loan forgiveness of a minority that did.
The truth is, borrowers had and still have choices. No one was forced to attend an expensive university or enroll in a low-return graduate program. Many Americans worked while attending college, lived frugally, or made the tough decision not to attend at all to avoid debt. When I took out my student loan more than a decade ago, I did so recognizing that I, not the government, would be responsible for paying it back.
By forgiving loans based on job titles rather than financial need, PSLF turns the concept of public service on its head. A nurse who works at a nonprofit hospital could get loans forgiven in 10 years, but a nurse working for a for-profit hospital would have to repay for a quarter-century. Why should two people with identical debt loads and public-spirited intentions be treated so differently simply because of their employer’s IRS tax designation?
President Trump has thankfully attempted to narrow the eligibility for PSLF beneficiaries, but his method needs significant refinement. His March Executive Order requires the Education Department to exclude “organizations that engage in activities that have a substantial illegal purpose,” but offers limited definitions of “substantial” or “illegal.” This could set a dangerous precedent that could be weaponized by a different administration.
Lawmakers, including President Trump, should instead explore a menu of options that could save billions of dollars. Possible reforms include a limit on the amount of debt eligible to be forgiven, a reasonable income cap that counts toward qualified payments, or narrowing forgiveness to industries facing worker shortages.
While any of those alternatives would be preferable to the status quo, ideally, the President should work with Congress to end the program and address the real reasons young Americans have such high debt levels. It’s long overdue for colleges and universities to reduce their costs instead of passing them along to taxpayers.
PSLF was a well-intentioned policy that has outlived its purpose. It is regressive, inefficient, and unfairly structured. Eliminating the program would not be an attack on public service, but rather a necessary step toward a more coherent and equitable student loan system — one that doesn’t pick winners and losers based on job title, but helps all Americans who are struggling under the weight of educational debt.
Let’s put policy over politics and finally graduate from PSLF.