A government swindle on student debt

IMAGINE IF, after graduating from college with a five- or six-figure student loan debt, you learned you could enroll in a government program that would allow a portion of your debt to be forgiven in exchange for 10 years of work at a broad range of public-service jobs, from nonprofits to government agencies.

This was the promise of the federal government's Public Service Loan Forgiveness (PSLF) program, signed into law by President George W. Bush in 2007 as part of the bipartisan College Cost Reduction and Access Act.

The program offered a track for recent grads to escape debt obligations and provided an incentive for graduates to fulfill urgently needed--and usually low-paying--positions serving the public in one way or another.

Now imagine that, after spending the early years of your career working for less money in public service in exchange for debt forgiveness, you find out that the government had decided to retroactively retract the offer--even though you received letters of approval confirming that your job qualified you.

This nightmare scenario is the actual situation confronting a number of PSLF program recipients, who last December were compelled to file a lawsuit, joined by the American Bar Association, to get the Department of Education (DoE) to keep its promises.

"With no warning and no coherent explanation, the Department [...] changed its mind" regarding its past approval of a number of individuals to the program, the suit explains. "As a result, these individuals were told that their years of public service counted for naught, their debt loads continued to mount, and their hopes of future financial security were suddenly dashed."

The finer details of the case are a bit more narrow, and not every PSLF beneficiary has been threatened with revocation of their eligibility. The case hinges mainly on the question of what types of nonprofits count as "qualifying public services."

THE ABSURDITY of the government's position is clear, and the case could have vast implications for the half million students who have signed up for the program if the courts rule in the government's favor.

Though the case dates from the Obama administration, a DoE victory could open the doors for the Trump administration to undermine one of the few programs that currently exists to alleviate the colossal burden of student debt that is crippling an entire generation of young people.

The PSLF program doesn't purport to solve the student debt crisis, and it also doesn't come anywhere near what's necessary to fully alleviate it. Only certain types of federal loans are eligible for forgiveness, and PSLF recipients are still required to make timely payments for an entire 10 years before their loans are forgiven.

However, for what it's worth, the program is a potential escape route for hundreds of thousands of recent graduates, and its impact is still large. Only a small fraction of total eligible workers have signed up for PSLF; the Consumer Financial Protection Bureau has estimated that 25 percent of the U.S. workforce could qualify for it.

The first loans scheduled to be forgiven are set for this October, exactly 10 years after the program's enactment, which is a milestone of some significance considering the government's recent attempts to retroactively disqualify some PSLF recipients.

Last month, the DoE, under Trump's newly confirmed Education Secretary Betsy DeVos, filed its first legal response to the suit.

The government's defense is awash in the most Orwellian contradictions and denials imaginable. In one paragraph, for example, DoE lawyers admit that department contractors regularly review and affirm whether workers qualify, while arguing that "approval...does not reflect agency action on the borrower's qualifications for the PSLF Program."

"It's been really perplexing," said Jamie Rudert, one of the plaintiffs. "I've never gotten a straight answer or an explanation from FedLoan about what happened, and the Department of Education isn't willing to provide any information."

According to the New York Times:

Mr. Rudert submitted the certification form in 2012 and received a letter from FedLoan affirming that his work as a lawyer at Vietnam Veterans of America, a nonprofit aid group, qualified him for the forgiveness program. But in 2016, after submitting his latest annual recertification note to FedLoan, he got a denial note...

What changed? Mr. Rudert said he did not know. After filing a complaint with the Consumer Financial Protection Bureau, he received a reply from FedLoan saying that his application "had initially been approved in error." He has not been told what the error was, and has not found any way to appeal the decision.

TOTAL U.S. student debt has more than doubled in the past 10 years and now tops $1 trillion. The lack of tuition-free college with universal access means that young people have been forced to structure some of their most important life choices around ways to avoid a lifetime of indebtedness.

The problem with PSLF is not that it's too generous, as DoE officials under both the Obama and Trump administrations seem to believe, but that it doesn't go far enough to address the student debt crisis strangling an entire generation of workers.

The attack on PSLF from the capricious rulings of government bureaucrats should serve as an alarm bell. The Trump administration has already shown that its claims to stand up for those forgotten by Washington were totally empty.

And considering the Obama administration's own rumblings about capping an individual's total debt forgiveness at $57,500, it's clear that a bipartisan compromise could still amount to a harsh assault on the living standards of PSLF recipients.

It may be that a movement that begins as a defense of a program like PSLF can ultimately embrace and win what many students throughout the industrialized world already enjoy: free and universal education for all people, regardless of citizenship. Meanwhile, we should fight for the abolition of student debt, through the expansion of PSLF and other programs.