A federal program encouraging the civil service by paying off federal school loan balances is about to be canceled, potentially leaving thousands of active duty officers with mountains of debt they expected to be written off.
Called the Civil Service Loan Forgiveness Program, former President George W. Bush launched the plan in 2007 to encourage people earning expensive college degrees to work for the federal government. After working continuously for ten years in government jobs, such as active duty military service, and making regular monthly payments on federal loans, borrowers could apply to the U.S. Department of Education for cancellation of any remaining federal school loan balance.
October marked the first month that program participants could apply for forgiveness of their federal loans. But just as the U.S. Department of Education is processing the first wave of loan forgiveness applications, the fiscal year 2018 budget puts the entire program on the chopping block.
If canceled, what is at stake is the implicit promise made to thousands of officers who accepted commissions hoping that after a decade of active duty, their outstanding federal school debt balances would be cleared. Yet it could save the federal government $12 billion over the next ten years.
Currently, nearly 6,800 active-duty military personnel are enrolled in the program — about 22% of all military officers commissioned since 2007 who paid for their degrees with federal loans, personal loans, private funds or scholarships, statistics show. from the Department of Education and the Department of Defense.
In the Navy and Marine Corps, nearly 2,500 people are counting on paying off their school loan balances after a decade of active duty, according to the Department of Education. They could be saddled with tens of thousands of dollars in school debt that they hadn’t hoped to recover at the time of commissioning.
Since 2007, the DoD reports that 30,091 officers — 23% of the 135,550 officers commissioned over the decade — earned degrees without attending a federally funded military academy, officer candidate school, or through a funded ROTC program. by the DoD. The DoD does not track how people in these situations paid for their school, or when the degrees were earned.
Nationwide, about 431,853 borrowers — including government employees and qualified nonprofits — are enrolled in the PSLF program, according to the Department of Education.
Recruitment and retention
From the Navy’s perspective, the great thing about the PSLF program is that the Department of Education administers it and is ultimately responsible for repaying loan balances.
The program is an important tool used to attract and retain talent, especially officers with in-demand skills, said Lt. Cmdr. Rabb Muhammad, a former recruiter. The Navy has a great need for recent graduates with law degrees, medical degrees, and especially advanced engineering degrees.
While a recruiter, Muhammad was particularly focused on recruiting people with advanced engineering degrees to be instructors at the Navy’s Nuclear Power School outside of Charleston, South Carolina. Often these graduates have hundreds of thousands of dollars in student debt.
“As a recruiter, our primary focus was to recruit people with advanced degrees,” said Lt. Cmdr. Rabb Mohammad. “It’s hard to convince these people to give up everything they’ve worked for to take a low-paying military job.”
Once someone is sold to join the Navy, Muhammad said recruiters often enter the deal with the prospect of seeing federal school loan balances paid off after just ten years of payments.
“They have student loans, but don’t know how to pay them back,” Muhammad said.
Secretary of the Navy Richard V. Spencer, through a spokesman, declined to comment on the benefits of the program for recruiting and retaining personnel, or what canceling the program would mean for efforts. recruitment and retention of seafarers with highly sought-after skills.
Why cancel the program?
According to the president’s 2018 fiscal year budget, released by the Office of Management and Budget, the program, which has not yet canceled any student debt, is considered too costly. The budget states that “to generate savings that help put the nation on a more sustainable fiscal path, the budget eliminates the public service loan forgiveness program.”
The Ministry of Education would not say where the desire to end this program came from. But a recent report from the Brookings Institute offers some clues as to why the president’s budget proposed ending the program just as he was to start paying off school loans.
An analysis by the Congressional Budget Office indicates that people who borrow for graduate or professional schools are likely the biggest beneficiaries of the PSLF program, because “they tend to borrow larger amounts than people who borrow for higher education. first cycle “.
The Brookings Institute report, citing Department of Education statistics, states, “The median indebtedness of PSLF enrollees exceeds $60,000, and nearly 30% of PSLF enrollees have borrowed more than $100,000.
As an example of how quickly participation in the program is growing and the amount of payments expected, a year ago the CBO assessed a pair of changes being considered by the Obama administration. First, loan forgiveness borrowing would be capped at loans of $57,500 for new enrollees. Any additional borrowing for school would be shifted to income-driven repayment plans. This, the CBO predicted, would save between $5 billion and $12 billion over the next decade. Extending the repayment periods for these loans could also translate into billions of dollars in savings over the next decade.
Instead, the new budget focuses loan repayment assistance solely on income-driven repayment plans, which allow borrowers to set monthly loan payments based on a variety of factors, including income and household size. family.
This is the suggestion made by the Brookings Institute, which states that “reforms that limit the more excessive features of the PSLF are warranted, although repeal of the PSLF altogether and leaving the federal reimbursement program based on the income (IBR) to achieve the PSLF target are still a solution. best course of action.
Trump’s proposed budget would cap those loan repayments at 12.5% of discretionary income. After 15 years, the federal government would forgive the remaining outstanding balance on undergraduate degrees. For graduate degrees, the federal government would forgive any outstanding balance after 30 years.
A final decision on the future of the PSLF program has yet to be made, according to a spokesperson for the Ministry of Education. Options include canceling the program outright, ending new enrollments, or transferring current participants to another program.