Federal Recruiting Could Get Even Harder With Loan Program's Demise

The Trump administration wants to axe a program designed to encourage young people to pursue careers in government and the nonprofit sector, but experts said the move would jeopardize efforts to recruit the next generation of federal employees.

The plan to eliminate the public service loan forgiveness program is part of the administration’s controversial 2018 budget proposal that aims to dramatically reshape government and how it operates. While the Education Department said those currently counting on the program to help them with their student loans will not be affected, many questions remain.

The PSLF program was approved in 2007 under the George W. Bush administration. In exchange for working in the public sector or at qualifying nonprofit jobs for 10 years, people with qualifying student loans would see those debts erased, provided they made continuous payments throughout that period.

Besides eliminating the PSLF program, Trump’s budget proposal consolidates a variety of loan forgiveness programs offered by the federal government into one income-driven repayment program, in which all new borrowers would pay 12.5 percent of their discretionary income. Undergraduate borrowers would see the remainder of their debt forgiven after 15 years, while those who took student loans to pursue graduate degrees would see their debt forgiven after 30 years.

Don Kettl, a professor at the University of Maryland School of Public Policy, said an end to the PSLF could cause students to rethink entering public service.

“For new students coming into graduate programs, there’s going to be a big economic and a big ethical question about whether or not people will have that program there for them in a decade,” Kettl said. “With that in mind, it throws even more cold water on the prospect that students will seek careers in government service. If you can’t be sure that promises made now will be there when you’re eligible, it’s hard to see prospects for jobs in the short and medium term.”

In March, the Education Department caused some alarm about the PSLF program’s future with its response to a lawsuit filed by lawyers with the American Bar Association and similar groups last year, which alleged the lawyers were improperly denied access to PSLF after they had been preliminarily approved for the program. The agency said preliminary approval by PSLF vendors did not indicate “final action” by the agency, stoking fears that the department could change its mind at any time before the end of 10 years.

But Education Press Secretary Liz Hill confirmed to Government Executive Monday that all people who have finished school or finished borrowing for college by June 30, 2018, would still be eligible for the PSLF program.

Hill said Education could not say how many federal employees are currently enrolled in PSLF, citing pending litigation. A report on the agency’s website said that as of the end of 2016, 552,931 borrowers had been approved for the program (the figure includes participants serving in federal, state and local government agencies as well as in qualifying nonprofit organizations). According to the Partnership for Public Service, the majority of those enrolled in the program work for some level of government.

Margot Conrad, director of education and outreach for the Partnership, said programs like PSLF are vitally important in attracting talent to the public sector, especially as the cost of higher education continues to rise.

“If you think about the fact that the average debt for students graduating in 2016 was about $37,000, you can understand why it is challenging for young people today to consider going into public service,” Conrad said. “Why this program is so important is that it helps folks that are passionate about public service make that decision to go into government or the nonprofit sector, and to do it with a financially sustainable option.”

Conrad argued that eliminating the program could compound the effects of an anticipated retirement wave in the coming years.

“About two thirds of the Senior Executive Service in the federal government is eligible to retire in the next five years, and in our federal workforce right now, only 6 percent are under the age of 30, which is really concerning because in the private sector, that’s more like 23 percent,” she said. “If the federal government wants to remain competitive and attract the next generation of talent, we need to find incentives to bring people into government.”

The Trump budget claims that eliminating the program would save $859 million in fiscal 2018 alone, and $27.5 billion over 10 years. And consolidating the other federal loan programs would save $1.7 billion in fiscal 2018, and $76.4 billion over the next decade. The Office of Management and Budget calculated the savings based on the value of loans taken out by potential enrollees in a given year, had the program continued.

Doug Criscitello, a former OMB and Congressional Budget Office analyst, said that manner of scoring loan programs has been standard since the early 1990s.

“When budgeting for a credit or loan program, it needs to incorporate the expectations for repayments through the life of a particular loan cohort in the year of the [loan’s] origination,” he said. “It’s a very sound practice relative to how it used to be done.”

It is unclear whether members of Congress would go along with eliminating the program. But Kettl said the damage to the government’s ability to attract talented graduates may have already been done.

“It’s hard to guess, but hiring freezes, talks of downsizing and [cuts to federal retirement programs] is already doing a pretty good job of undermining the prospects of new students going into government employment,” he said. “This doesn’t help, and it’s one more log on this fire that’s building and growing, and driving people further and further away from public service.”