Congress introduced bill to fix student debt relief for public servants

The U.S. government encourages Americans to become public servants in exchange for student debt relief down the road—but so far that promise hasn’t been fulfilled, according to bipartisan lawmakers.

Democratic Congressman Brendan F. Boyle and his Republican counterpart, David P. Joyce, recently unveiled the Public Service Loan Forgiveness Administrative Improvements Act.

The bill is intended to improve the approval process for the Public Service Loan Forgiveness (PSLF) program, which was introduced in 2007 to help public servants in lower-paying jobs close out their student loan balances.

The PSLF program promised to forgive the student loans of public servants who worked in “low-paying” positions such as nurses, teachers, social workers, police officers, military service members, and veterans.

To qualify, workers must be employed in these and related professions at any level of government or qualifying nonprofit and make at least 120 monthly student loan payments consecutively.

That means workers who qualify can get their debts erased after ten years.

Although the PSLF has forgiven $51 billion in student loans for 715,000 workers, the lawmakers said a staggering 99% of applicants have been denied forgiveness under the existing program. The rejection rate is based on a 2019 review of the PSLF program by the Government Accountability Office.

The slim success rate makes it harder to attract workers to the public sector, especially as the cost of student debt continues to rise.

The Administrative Improvements Act has pledged to close this gap by improving communications between PSLF applicants and government agencies and increasing transparency in the approval process

“All students deserve a caring, qualified, committed, and certified teacher in their classroom, but skyrocketing student debt has made it much more difficult to attract and retain educators because they simply cannot afford to stay in the teaching profession they love,” said Becky Pringle, president of the National Education Association.

“For those educators who stay, decisions like buying a home or starting a family are delayed because of out-of-control student loan bills,” she said.

Americans are opting out of government jobs

Without programs like PSLF working properly, Americans may have fewer incentives to join the public service. Although drop-out rates for police officers are well documented, Americans are turning away from other public sector jobs as well, especially in local governments.

Analyzing two years of Labor Department data between 2020 and 2022, The Marshall Project determined that the number of government workers has decreased by 5%.

Meanwhile, the number of local law enforcement workers fell by 4% over the same period.

According to NEOGOV, a public HR management software provider, 20% of state and local government agencies have cut back services because of staffing shortages.

With record costs of living, more workers are opting for the private sector, and not without reason.

The National Treasury Employees Union (NTEU) reports a 27.5% pay gap between the private sector and the public sector for similar jobs. That's a sizable jump from 2022, when the pay gap was 24.1%.

“The alarming new pay gap proves what federal employees have been feeling all year: Their paychecks are not keeping up with inflation and monthly bills are increasingly harder to cover,” said Doreen Greenwald, NTEU’s national president.

With the pay gap widening, the cost of student debt is becoming increasingly hard to bear for many public sector workers.

As student debt grows, more public servants are likely to need PSLF

Public servants have a lot to gain from a more streamlined PSLF program. According to the Education Data Initiative, it now takes an average of 20 years for student loan borrowers to pay off their debt.

Workers who qualify for PSLF can cut that timeline in half.

While government salaries vary wildly, workers in local governments and nonprofits earn substantially less than federal agencies like the SEC, CFTC, FHFA, and MedPAC.

For example, social workers, firefighters, and administrative workers at local government departments often earn less than $50,000 annually, according to data from ZipRecruiter and Salary.com.

Beyond providing relief to public servants, Democrats are vying for a more wholesale student loan forgiveness program.

Several Democratic lawmakers are pressing the Education Department to maximize debt relief in its proposal to replace President Biden’s initial student loan forgiveness program, which was struck down by the Supreme Court in June.

Americans’ student loan balances have swelled to $1.73 trillion as of November, according to the St. Louis Fed. Loan balances have increased by a staggering 53% over the past ten years.