The Public Student Loan Forgiveness (PSLF) program might be on the chopping block for the new administration’s budget. According to the Washington Post, people who will qualify for forgiveness this year will not be affected, but those who were betting their education on the PSLF will need to rethink their strategy.
College comes with a hefty price tag. The PSLF program has been a factor that many students consider when deciding to enroll in college or when choosing a career.
Public sector and not-for-profit jobs typically offer lower pay rates than the for-profit job sector. But students will often graduate with the same load of student loan debt as their counterparts who enter the private sector.
That means a social worker who helps children might only make $30,000 a year but still carry that $80,000 student loan debt from undergraduate and graduate school that qualified him or her for the job as a social worker. PSLF helped to fill in that gap in pay by allowing student loans to be forgiven after a certain length of time.
What is the PSLF program?
The PSLF program began in 2007 as a means to help public sector employees pay off their student loans. It was also used as an incentive for people to join public sector jobs because they wouldn’t need to worry about their student loans and how they would be able to pay them off when starting with lower salaries. Graduates needed to enter work for a qualifying not-for-profit or public sector organization and make on-time student loan payments for 10 years in order to qualify. Paperwork would need to be filed every year to confirm status.
As long as the graduate stayed in the public and not-for-profit sector, it really didn’t matter where they worked. Changing organizations had no bearing on qualifying for the forgiveness as long as the organizations were PSLF eligible. The program was not an incentive to stay at a particular organization but rather an incentive to stay working in the public sector.
Qualifying for the PSLF program used to mean getting an approval letter from FedLoan Servicing that stated the employer fit the requirements for PSLF-qualified employment. But now the Department of Education, under its new administration, is calling all of those letters into question. Some people might find out that their 10 years of service and approval letters don’t mean anything.
Retain and incentivize employees
While this is helpful for retention on a national level, it doesn’t do much for an individual company’s or a city’s retention. And with the possibility that PSLF might go away, what can companies do to fill in that gap?
Take a look at Memphis, Tennessee. This city has offered its employees a student loan repayment program in which the city pays $50 a month toward student loans for employees who have worked for the municipality for a year or more.
Memphis wanted to recruit and retain more workers, especially in the departments for public safety. City officials had taken note of a report that showed the rate for student loan debt in their city and what it would mean for their workers.
Perhaps other cities will begin to follow suit and offer student loan paydown plans to retain their employees. Fighting the so-called Brain Drain requires understanding what your citizens need and finding the right mix of incentives and benefits to not only keep people in your city but also draw more people to live and work there.