The Public Service Loan Forgiveness (PSLF) program offers relief to student loan borrowers who work in public service. There’s no Public Service Loan Forgiveness cap; the program forgives your entire balance after 10 years of repayment.
Exactly how much PSLF forgives depends on how much each borrower owes at the end of their decade of service. But while some people think this program is a no-brainer, others are wary of its potential cost for taxpayers.
According to the Congressional Budget Office, the program could cost nearly $24 billion over the next decade. To get a grasp of what this program does and what’s its implications are, let’s address the following questions:
- What is the Public Service Loan Forgiveness program?
- Why does PSLF cost so much?
- What are the arguments against PSLF?
- What are the arguments in favor of PSLF?
- What is the Biden Administration’s perspective on PSLF?
- Is PSLF a good idea?
Congress created the Public Service Loan Forgiveness program in 2007, and President Barack Obama’s administration expanded it in 2012. Its purpose is to offer low-paid public service workers some relief from their student loan debt.
Borrowers first sign up for an income-driven repayment (IDR) plan, which limits their monthly payments to a percentage of their income. (Note: The government has expanded the type of repayment programs eligible for PSLF. Click here for the latest details.)
Then, after borrowers make payments for 10 years (while working at a qualifying workplace), their remaining federal student loans are forgiven.
Public Service Loan Forgiveness sounds like a fabulous (and well-deserved) option for our public servants. So what’s the problem?
It could cost much more than originally anticipated. Here are two reasons why.
1. Massive number of eligible borrowers
The eligibility requirements for PSLF are purposely broad.
You can enroll in the program if you work for a government or nonprofit organization — which means an estimated 15% of the population (nearly 24 million people) could be eligible, according to the Brookings Institution. Of course, that number becomes smaller when filtering for people who owe student loans.
2. No Public Service Loan Forgiveness cap on forgiveness
As of right now, there’s no Public Service Loan Forgiveness cap. In other words, there’s no limit to the amount of loans that can be forgiven. So people can rack up six figures of undergraduate and graduate student loans — and then have them forgiven.
Case in point: An estimated 30% of PSLF-eligible borrowers have more than $100,000 of loans, according to the Brookings Institution.
Jason Delisle is a resident fellow at conservative think tank American Enterprise Institute and an advocate for changes to the PSLF program.
In the above Brookings report, he argued that the program is being abused as a subsidy for graduate students. Using our Public Service Loan Forgiveness calculator, you can consider what he means.
Let’s say you’re single, earn an income of $35,000 that grows by 3.5% each year, and have loans with an average weighted interest rate of 5.70%.
Here’s what would happen under PSLF if you were on income-based repayment and had:
$50,000 of loans
- Total balance paid: $31,412
- Total forgiveness: $46,818
$100,000 of loans
- Total balance paid: $31,412
- Total forgiveness: $125,695
As you can see, the program sometimes makes the borrowed amount irrelevant — because the rest will be forgiven anyway.
Delisle offered an example of a man who accumulated $28,000 of loans as an undergraduate. He continued on to a master’s in social work and then a job in public service.
Assuming he earned the average income for a social worker (remember: his payments would be based on income), he’d pay off only $28,000 of his loans over 10 years. That means his entire graduate education would’ve cost him nothing.
“Thanks to PSLF, a student like the hypothetical one above who is faced with the choice of borrowing $10,000 to live frugally while enrolled in graduate school or $20,000 to support a more comfortable lifestyle is probably more inclined to choose the latter,” Delisle wrote.
In Delisle’s eyes, PSLF is too generous and — because income-driven repayment plans forgive loans after 20 or 25 years — redundant.
On the other side of the fence are progressives and public servants.
“The stakes are high for students, particularly those who may face financial stress when they graduate,” wrote Mark Zuckerman, president of the Century Foundation. Because of rising student loan defaults and delinquencies, he said PSLF is “critical.”
He also argued that it benefits our country as a whole.
“For new graduates carrying student loan debt, the promise [of] loan forgiveness and flexible repayment options can be an important factor in taking and staying in … important public interest jobs,” he wrote.
Isaac Bowers, director of law school engagement and advocacy at Equal Justice Works, agrees.
He wrote a response to Delisle’s piece in The Huffington Post and argued that only a small percentage of people who are eligible for PSLF actually have student loans and will stay in public service jobs for 10 years.
Bower called Delisle’s article “misleading” and said PSLF is an “affordable and critical investment that directly benefits all our communities.”
While the previous administration proposed eliminating the PSLF program completely, Pres. Joe Biden has suggested plans to reform it.
During his bid for presidency, Biden said he supported a Public Service Loan Forgiveness cap of $50,000, with annual payouts of $10,000.
Instead of waiting for 10 years to receive full loan forgiveness, eligible borrowers could get partial loan cancellation each year.
But this forgiveness would be capped at five years, meaning borrowers with debt loads higher than $50,000 would still owe money after this time.
Biden has not made any changes to the PSLF program, but it’s worth keeping an eye out for future policy reform.
What do you think? Is PSLF worth it?
Regardless of whether you support the program, you always can advocate for yourself.
If you haven’t yet enrolled in school, think carefully before taking on student debt. If you’re already struggling with loans, educate yourself by reading through our blog and learning about programs like IDR and PSLF.
And if you have strong feelings about student loan forgiveness programs, contact your representatives to make your voice heard.
Rebecca Safier contributed to this report.
Interested in refinancing student loans?Here are the top 9 lenders of 2022!
|Lender||Variable APR||Eligible Degrees|
|2.75% – 8.90%1||Undergrad & Graduate|
|2.50% – 6.80%2||Undergrad & Graduate|
|2.81% – 7.21%3||Undergrad & Graduate|
|2.49% – 7.99%4||Undergrad & Graduate|
|3.24% – 7.99%5||Undergrad & Graduate|
|3.24% – 8.24%6||Undergrad & Graduate|
|2.99% – 7.24%||Undergrad |
|1.74% – 7.99%7||Undergrad & Graduate|
|3.69% – 9.92%8||Undergrad & Graduate|
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1 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount. Fixed loans feature repayment terms of 5 to 20 years. For example, the monthly payment for a sample $10,000 with an APR of 5.47% for a 12-year term would be $94.86. Variable loans feature repayment terms of 5 to 25 years. For example, the monthly payment for a sample $10,000 with an APR of 5.90% for a 15-year term would be $83.85.
The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.
To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of October 1, 2022.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $9 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the 30-day Average Secured Overnight Financing Rate (“SOFR”) and changes in the SOFR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%. There is no limit on the amount your interest rate can increase at one time. The Index is currently published by the Federal Reserve Bank of New York (“New York Fed”). If the Index is no longer available, it will be replaced by a replacement Index according to the terms of the promissory note.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of October 31, 2022. Information and rates are subject to change without notice.
3 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of 5 years and is reserved for applicants with FICO scores of at least 810.
As of 10/26/2022 student loan refinancing rates range from 2.81% APR – 7.21%APR Variable APR with AutoPay and 3.99% APR – 10.68 APR% Fixed APR with AutoPay.
4 Rate range above includes optional 0.25% Auto Pay discount. Important Disclosures for Earnest.
You can choose between fixed and variable rates. Fixed interest rates are 3.99% – 8.74% APR (3.74% – 8.49% APR with Auto Pay discount). Starting variable interest rates are 2.74% APR to 8.24% APR (2.49% – 7.99% APR with Auto Pay discount). Variable rates are based on an index, the 30-day Average Secured Overnight Financing Rate (SOFR) plus a margin. Variable rates are reset monthly based on the fluctuation of the index. We do not currently offer variable rate loans in AK, CO, CT, HI, IL, KY, MA, MN, MS, NH, OH, OK, SC, TN, TX, and VA.
5 Important Disclosures for Navient.
6 Important Disclosures for SoFi.
Fixed rates range from 3.99% APR to 8.24% APR with a 0.25% autopay discount. Variable rates from 3.24% APR to 8.24% APR with a 0.25% autopay discount. Unless required to be lower to comply with applicable law, Variable Interest rates on 5-, 7-, and 10-year terms are capped at 8.95% APR; 15- and 20-year terms are capped at 9.95% APR. Your actual rate will be within the range of rates listed above and will depend on the term you select, evaluation of your creditworthiness, income, presence of a co-signer and a variety of other factors. Lowest rates reserved for the most creditworthy borrowers. For the SoFi variable-rate product, the variable interest rate for a given month is derived by adding a margin to the 30-day average SOFR index, published two business days preceding such calendar month, rounded up to the nearest one hundredth of one percent (0.01% or 0.0001). APRs for variable-rate loans may increase after origination if the SOFR index increases. The SoFi 0.25% autopay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. This benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The benefit lowers your interest rate but does not change the amount of your monthly payment. This benefit is suspended during periods of deferment and forbearance. Autopay is not required to receive a loan from SoFi.
7 Important Disclosures for Purefy.
Purefy Student Loan Refinancing Rate and Terms Disclosure: Annual Percentage Rates (APR) ranges and examples are based on information provided to Purefy by lenders participating in Purefy’s rate comparison platform. For student loan refinancing, the participating lenders offer fixed rates ranging from 2.73% – 7.99% APR, and variable rates ranging from 1.74% – 7.99% APR. The maximum variable rate is 25.00%. Your interest rate will be based on the lender’s requirements. In most cases, lenders determine the interest rates based on your credit score, degree type and other credit and financial criteria. Only borrowers with excellent credit and meeting other lender criteria will qualify for the lowest rate available. Rates and terms are subject to change at any time without notice. Terms and conditions apply.
8 Important Disclosures for Citizens.
Education Refinance Loan Rate Disclosure: Variable interest rates range from 3.69%-9.92% (3.69%-9.92% APR). Fixed interest rates range from 4.49%-10.11% (4.49%-10.11% APR).
Undergraduate Rate Disclosure: Variable interest rates range from 6.39%- 9.60% (6.39% – 9.60% APR). Fixed interest rates range from 6.58% – 9.79% (6.58% – 9.79% APR).
Graduate Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).
Education Refinance Loan for Parents Rate Disclosure: Variable interest rates range from 3.69%- 9.09% (3.69%- 9.09% APR). Fixed interest rates range from 4.49% – 9.28% (4.49% – 9.28% APR).
Medical Residency Refinance Loan Rate Disclosure: Variable interest rates range from 3.69% – 9.16% (3.69% – 9.16% APR). Fixed interest rates range from 4.49% – 9.35% (4.49% – 9.35% APR).