Public Service Loan Forgiveness Might Be Capped — You Can Help Stop It

The federal government’s public service loan forgiveness (PSLF) program has helped many public interest lawyers deal with their law school debt. Proposed restrictions on the program might change that. But you can help do something about it. Read on.

I’ve mentioned PSLF before, but not in much detail. What exactly is it?

Under the program, the government forgives the remaining educational debt of any person who has been employed in a public service job for ten years and has made payments on the loan over those ten years. Each of these terms requires a little unpacking: “Educational debt” is limited to Federal Direct loans, including consolidations. “Public service” is broadly defined as including prosecution, criminal defense, civil legal services, government employment, military employment, and a host of other fields. And “payments” means some combination of standard payments, income-based repayments (IBR), and income-contingent repayments (ICR). Payments under the newer Pay As You Earn (PAYE) program also qualify. PSLF is housed at 20 U.S.C. § 1087e(m), so head on over there if you’re thirsty for more details.

One important note: IBR, ICR, and PAYE payments sometimes don’t even cover accrued interest, and all these programs allow for at least some of this unpaid interest to be capitalized. As a result, people making payments under these programs sometimes see their loan balances increase. And this means that PSLF provides a really substantial benefit to these people in particular.

But soon that may no longer be the case.

I recommended a few weeks ago that aspiring public interest lawyers should go to law school for free, writing, “Why worry about LRAPs and IBR and PSLF when you can simply avoid the debt in the first place?” Well, now anyone intending to rely on PSLF may indeed have something to worry about.

When President Obama released his proposed FY2015 budget last spring, it contained a troubling recommendation: a cap on PSLF benefits [pdf]. The amount of the proposed cap was the opaquely-worded “aggregate loan limit for independent undergraduate students,” which, it turns out, is $57,500. This would be a significant benefit cut for many lawyers — recall that the average law graduate debt is somewhere in the ballpark of $140,616. The cap was designed to offset a significant expansion of the PAYE program — more people would be eligible, but the eventual payout would be less. Back when the proposal was announced, ATL covered the development. Elie acknowledged some solid public-policy reasons to be skeptical of PSLF, but he also did not pull any punches in opposing a PSLF benefits cap.

Though the President’s budget didn’t go anywhere, the PAYE expansion — and, presumably, the PSLF cap — did get traction. In June, the President issued a memo on the topic. And in September the Department of Education announced a negotiated rulemaking “to develop proposed regulations to allow more student borrowers of Federal Direct Loans to use the ‘Pay as You Earn Repayment Plan’”; the negotiated rulemaking will begin in February.

Given all this, a PSLF cap still appears to be very much on the table.

To try to fight the cap, the nonprofit Equal Justice Works (EJW) — an organization whose mission is to support public interest lawyers, and from which I myself have directly benefited — is requesting information from lawyers who have been able to pursue public interest work because of PSLF. In the words of EJW: “While we hear from countless borrowers about how critical PSLF is to making a public interest career possible, currently, there is little hard data on who is relying on the program and its impact.” In order to collect data, EJW has prepared a short survey for public interest lawyers and law students. EJW says that “this data will be invaluable in helping Equal Justice Works and a coalition of interested groups advocate for Public Service Loan Forgiveness” and against any PSLF benefit cap.

You can read more information about EJW’s survey in their statement. If you’ve benefited from PSLF, please consider filling it out; here’s the link one more time. The deadline is March 2.

And if you’re a current or future law student intending to rely on PSLF to deal with your law school debt, you’ll definitely want to pay attention to any further developments — and maybe rethink your plans.

Note: if you’re interested in more detail on IBR, ICR, PAYE, and PSLF, consider browsing askheatherjarvis.com and educatedrisk.org, both of which feature loads of good information.