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Sat Oct 31, 2015, 01:02 PM

Here's how you get your student debt erased

By Alexander Holt

"At the Republican debate Wednesday, John Kasich proved himself to be the true Jon Huntsman of this cycle when he brought up federal student loan debt and said, "For those that have these big high costs, I think we can seriously look at an idea of where you can do ... legitimate public service and begin to pay off some of that debt through the public service that you do."

Actually, that idea is already law, it's called the Public Service Loan Forgiveness program, or PSLF, in which borrowers pay an affordable percentage of their income every month, and after 10 years any remaining debt is forgiven.

It's a flawed program. Defining "legitimate public service" turns out to be difficult. Right now, anyone working for any level of government or a 501(c)(3) nonprofit qualifies. That means many lawyers and doctors, even those earning high incomes in their 10th year of repayment (say, over $100,000) still potentially have the ability to receive hundreds of thousands of dollars forgiven from the expensive degrees they received from elite institutions.

And lately, people who think they are doing a public service, but don't work for a nonprofit, think they ought to qualify as well.
he most recent group who deem themselves worthy of qualification are farmers. Take Emily Best, a 32-year-old Pennsylvania farmer with debt from graduate school, as reported by MartketWatch. She's doing the public a tremendous service by growing the food we eat, so why shouldn't she get PSLF? The difficulty of answering the question demonstrates why it's so tricky trying to define whatever Kasich, or anyone else, means by "legitimate public service."

Best is actually already eligible for and using a generous provision that anyone with a federal student loan can benefit from called Income-Based Repayment, in which she pays a percentage of her income. In fact, for people who make less than $17,655 a year, the monthly payment is zero. That would include Best, who makes $1,600 a month (though her room and board is covered by her employer), and if she fails to pay off her loan it will be forgiven after 20 or 25 years (there are a number of variations).

So Best's payment is already zero, but she's arguing for PSLF, a separate program (that can be used in conjunction with Income-Based Repayment,) that forgives all debt after 10 years of working for the government or a nonprofit. According to the U.S. Government Accountability Office, about 25% of all workers in the economy work for a government entity or a nonprofit. But not Best, because her farm is for-profit."


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Reply Here's how you get your student debt erased (Original post)
uawchild Oct 2015 OP
Igel Oct 2015 #1
hunter Oct 2015 #2
hedgehog Oct 2015 #3

Response to uawchild (Original post)

Sat Oct 31, 2015, 01:40 PM

1. There's no good solution.

But there are differing perspectives. Readers will read Holt's column and come away with his opinion.

Here are a couple of questions. Or more.

You take a doctor from an elite medical school and put him in a non-profit. Was there any value in that degree? Perhaps if he'd gotten a degree from a cheaper school he'd done just as good a job. So he's foregoing a higher than average starting salary for a non-profit or a government job. In the end, it may save the government money and be good for the public. Moreover, both may use that as a recruiting tool, and having the debt erased might make it easier for either to stay in that job as s/he accrues family and growing children. This would be a government benefit that typically isn't included in compensation valuation. "He took a job for $15k/year less, he's underpaid." (But at the end he gets something that has a cash value of $150k, without fretting over present value of that money with all the interest paid.) This, however, is entirely hit or miss. Some qualify, some don't. Hardly equitable.

Is this a good thing or a bad thing? Ivy League lawyering for the indigent? Probably still a good thing. Even if it's not absolutely, 100% fair. Not everything has to apply completely equally across the board when you're dealing with thousands of laws and dozens of programs covering 300+ million people aged 1 to 105.

Then there's the teacher. Yes, lesser pay, lesser loan. But if they're good in their field, often after paying off their debt they can get a better job. One colleague left and got a $20k/year salary increase. But often, however offensive it may be, teachers aren't tops in their field. Teachers are a small portion of the college graduate pool, but a disproportionate amount come from the bottom 1/3 of their graduating class. (So say surveys, questionnaires, interviews, and this consistently, when their college GPAs are compared to college data. Similarly, most collaborators on a project, if asked for their contribution, overstate their contribution: get self-reports on how much they contributed and most of the time if you total up the contributions you find that the team claims 140-145% of the credit. "Anecdata" is irrelevant here.)

We won't mention those grads who finish school and work for a non-profit flush with cash. Money and loan forgiveness in tandem. Way cool.

Or some ministers who receive housing allotments or live in church-provided housing but who receive low incomes and qualify for low or no payments.

The problem is immediately confusing "public service" with "government work" or "non-profit work" and confuse those with personal sacrifice that should be rewarded or compensated. Now, they can all overlap, or they can be utterly different kinds of things. If you're a doctor who decides to locate in an impoverished area and work for small potatoes you can have a small income and large personal sacrifice and not be engaged in "public service" as defined by this law. You can work for State and get your PhD from Georgetown for a mere $200k in loans while you make twice that a year and have it forgiven--as though that's public service in any real sense or with any real sacrifice.

Best suffers from a different problem. She feels she's engaged in public work, and in a post-Enlightenment culture feelings substitute for thinking and logic, where perceptions are more important than objectivity (and in which the idea of an objective reality is often denied by those horribly out of touch with it), anything like this becomes fraught with problems and riddled with grievance.

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Response to uawchild (Original post)

Sat Oct 31, 2015, 01:50 PM

2. Having no money works too...

... monetizing student loans was a stupid thing to do.

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Response to uawchild (Original post)

Sat Oct 31, 2015, 01:56 PM

3. My kids would be glad to get any job of any sort right now.

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