“At first glance, all of these loan forgiveness programs may seem to have merit. But they are all trying to paper over problems that the federal government created and that will continue to exist after the new rules go into effect. Forgiving billions of dollars in student loans means billions of federal dollars went to poorly run schools and students who were, in many cases, unprepared for college. While those students may deserve some kind of debt relief—and which very few of them can receive through bankruptcy—the Education Department continues to issue loans to unprepared students in order to attend poorly run schools.
The expansion of benefits offered by the PSLF program spells unique problems for taxpayers and future borrowers alike. Expanding eligibility to more kinds of “public service” workers, including employees of private companies and private contractors, is expected to cost over $13 billion in the next 10 years.
As with debt forgiveness for borrowers who are misled by their schools, PSLF on its face sounds like a good idea. If a student decides to take a career in public service—an essential but presumably low-paying job—then, after 10 years of payments, that student will be rewarded for his service by having a set amount of his remaining loan balance paid. However, those who work in the public sector often have the best job security, health care, and pensions among America’s middle-class workers.
What’s more, many professions counted as “public service” are some of the highest-paying positions in the entire job market. Physicians employed by nonprofit hospitals, for example, are eligible for PSLF. However, whether a cardiologist works for a nonprofit or a for-profit hospital, his yearly salary will likely top $400,000. Thus, prospective physicians can take on hundreds of thousands of dollars in debt for medical school, and only pay a fraction of the amount borrowed, while accruing millions of dollars in income over the course of their careers.
When academic deans can assure students that a large debt burden can be discharged by working for a nonprofit or the government after graduation, they can more easily justify exorbitant tuition costs. After all, why worry about borrowing a massive sum if you won’t have to repay it? The PSLF solution to high debt burdens for public sector workers has only aggravated the problem and will continue to. Once the government pours funding in the form of debt relief into the market for specific degrees, schools end up using these funds to justify hiking prices, thus generating a bigger student debt crisis. In turn, this enlarged crisis cries out for more government funding.
The solution to runaway student debt inflation is for the government to stop subsidizing tuition hikes. While limited debt relief for defrauded or disabled borrowers makes sense, the federal government needs to start making policy proposals that will attack the student debt crisis at its source—the cost of college attendance.
Student loan debt is a real and pressing problem for America’s poorest borrowers, but it is merely an inconvenience for millions of others, including many beneficiaries of PSLF. Solving the college cost problem in the long term requires getting the government out of the lending business.”