Tag: federal loans
Feds say they’ll forgive your student loan, but almost no one actually benefits
Student loan forgiveness promises fall far short due to red tape, fine print and bad advice. One program denied debt relief to 99 percent of borrowers.
The Department of Education recently released a status report on its Public Service Loan Forgiveness Program, and the results are eye-popping. The program promises loan cancellations for borrowers who commit to 10 years of public service, and the first group of borrowers is finally eligible. According to the status report, however, almost no one is getting relief: Of the 32,601 applications received by the end of June, only 96 borrowers have actually had their debt cancelled. Ninety-nine percent of the applications that have been processed were denied.
As lawmakers explore new solutions to our nation’s student debt crisis and college affordability woes, PSLF should serve as a cautionary tale. The program’s outcomes are distressing, but they are not entirely shocking. At first glance, PSLF sounds simple and generous. But it was packed full of red tape and fine print that made it nearly impossible for borrowers to navigate — red tape that was compounded by inexcusably poor advice from student loan servicers. For instance, many borrowers were unintentionally enrolled in the wrong repayment plan while completing their years of public service, rendering them ineligible for PSLF.
Solutions to student debt don’t come cheap
To develop policies that are likely to gain bipartisan support, legislators look for “sensible solutions” with modest price tags. But this creates tension when it comes to finding meaningful answers that speak to their constituents’ concerns over the high price of college and rising student debt. With 44 million student loan borrowers and more than $1.5 trillion in outstanding debt, those solutions don’t come cheap.
There is no amount of magic math that allows legislators to concoct generous benefits for students and other borrowers at little to no cost. But there is math that can take a program aimed at providing a generous benefit, load it up with eligibility requirements, conditions and other fine print, and greatly minimize the program’s cost. The result is government programs that sound great at bill signing ceremonies and in policymakers’ news releases, but provide very little value to Americans when implemented.