Public-sector jobs now come with a generous perk: student debt forgiveness

On March 21, President Biden announced another sweeping round of student debt cancellation—this time for workers enrolled in the Public Sector Loan Forgiveness (PSLF) program.

As the name implies, PSLF gives public-sector workers like teachers, social workers, police officers, public interest lawyers, and even some healthcare professionals the ability to erase their student loan debt—provided they have made regular monthly payments for 10 years.

“If you continue your career in public service, you’re on track to get your eligible student loans forgiven in less than two years through Public Service Loan Forgiveness,” reads an email sent out by the White House.

The latest round of student debt forgiveness amounts to a whopping $5.8 billion, wiping the slate clean for 78,000 borrowers. An additional 380,000 borrowers may be eligible for debt cancellation once they hit the 10-year payment mark after President Biden expanded the program in 2021.

As Creditnews reported, the Biden administration is fast-tracking its student loan forgiveness plan ahead of the 2024 presidential election—a shrewd maneuver after a more comprehensive program was struck down by the Supreme Court last summer.

So far, the president has canceled $144 billion in federal student loan debt for nearly 4 million people, with lots more on the way.

Student debt has emerged as an important political issue, with voters on both sides of the aisle saying the government needs to do more to help borrowers.

The politics of student debt

According to a recent Harris Poll survey conducted for Axios, 62% of U.S. adults said the government has some responsibility to help borrowers pay down their debt. The figure is as high as 76% for Democrats and a much lower 47% for Republicans.

Interestingly, the figures skyrocket for students currently enrolled in college. Among them, 84% said the government should help students pay their loans. Eighty-nine percent of Democrats and 81% of Republicans agreed.

It’s not hard to see why current students are more likely to need government support. Over the past 40 years, college tuition costs have increased by a staggering 169%, according to the Georgetown University Center on Education and the Workforce.

Even Millennials, who graduated more than a decade ago, have to work twice as much to pay off their student debt as their Boomer parents.

That’s why pollsters say Biden could get a much-needed bump from voters who need student debt relief.

“Biden’s popular student loan program was struck down, but the genie is out of the bottle,” Harris Poll CEO John Gerzema said of the president’s initial attempt at comprehensive student debt relief. “In courting young voters, taking things away is not usually a good campaign strategy.”

That means student loans could become a “sticky” political issue, even for Republicans who are trying to get into office. It doesn’t help that many borrowers have essentially staged a “massive student debt strike” and refuse to pay back their loans.

More student loan borrowers are struggling

Since the federal government ended its three-year forbearance program in October, millions of student loan borrowers have refused to pay back a single penny.

As it turns out, many borrowers have either reallocated their monthly payments to other essential costs or have taken on additional debt that needs to be repaid.

“The payment shocks will be significant” for borrowers, said Liz Pagel, senior vice president at TransUnion. The additional credit products that borrowers took out during student loan forbearance “mean additional monthly payments, which may pose added challenges,” she said.

Many won’t be able to make payments on their student loans at all if they’re behind on other bills.

“These borrowers might be unable to make payments on their student loans if they are already missing payments on their credit cards or auto loans,” said Kentia Elbaum, a spokesperson for the Consumer Finance Protection Bureau.

A recent survey conducted by Intelligent.com found that roughly one in ten borrowers are refusing to pay back their loans in hopes that the government will come to the rescue, as it has done for millions of borrowers already.

“Although the frustration behind the student loan boycott is understandable, it’s unlikely to lead to positive change,” according to Jake Hill, founder and CEO of DebtHammer, a payday loan almond consolidation company.

Even those who are making payments are struggling. The survey found that, among borrowers who have paid all or some of their monthly bills, 94% were feeling the pinch financially. Over half of them had to reduce other expenses, such as entertainment and leisure.