In response to the growing national crisis of student loan debt, many states have developed loan debt forgiveness programs. These limited programs, while potentially beneficial to some students, do little to remedy the ongoing and increasing national burden of student debt. Nor do they address the financial conditions that that keep the majority of middle- and low-income families from realizing the promise of higher education and contributing to the country’s economic growth.
In an attempt to help students pay off their debt, states are offering limited loan “forgiveness” programs. These programs, more accurately called loan relief programs, are not the panacea they purport to be. They are, in fact, self-serving programs that perpetuate a cycle of debt and a concentration of low-income graduates in low-paying public service jobs in areas of states that are underserved.
With the exception of the New York State program, which is based only on the graduate’s income, the state programs are instituted to address shortages in certain fields of the public service sector, such as healthcare, teaching, social work and law.
Rather than being occupationally broad-based, a survey of the state programs shows that the majority of the loan relief programs are limited to a very narrow segment of the workforce. In many states, programs are available only to selected healthcare workers or to lawyers willing to work in a selected federally- designated shortage area. In addition, the application process can be complicated, confusing, and hard to access, often resulting in significant barriers to some who might benefit the most from them.
Looking at these programs, we must ask ourselves a couple of tough questions. Why is there a shortage of people willing to work in these public service jobs? And, is a loan forgiveness or relief program the most rational or cost-effective approach to reducing student loan debt and filling the growing gap between trained professionals and the unfilled jobs in these areas?
The simple answer to the first question is that these are not great job opportunities. They typically offer low wages, may entail geographic relocation and recertification, require a time commitment of several years, and, oftentimes, involve a depressed socio-economic work environment. The prospects for career advancement may also not be favorable. The bottom line is that many of these positions are unattractive to those with high loan debts to repay and to graduates who are just starting out in an economy that is itself struggling to get back on its feet.
States are essentially luring in recent graduates to these relatively low-paying positions by offering them some partial relief on their student loans. States are using the increasing debt burden as leverage. Their debt makes our young graduates vulnerable to accepting jobs with long-term implications for some short-term relief on their payments. Most of them will not help the students themselves break the vicious cycle of debt.
Nor are state-based loan relief programs the answer to the nationwide student debt crisis. Rather than offering limited debt relief to a small group of graduates, states should be investing in raising the earnings in these public service occupations that are so vital to the social and economic well-being and sustainability of states. It is outrageous that their pay is so low, particularly for entry-level positions. States can be more effective in addressing both the need for public service workers and reducing the burden of debt on students by investing in wage increases for public service jobs in underserved areas. In that way they will become more attractive and the economic development and social well-being of the communities served will be improved. At the same time the employed graduates can be better able to pay off their debt.
And, more to the point of lowering student debt, states, if needed, should raise taxes to increase investment in higher education. These should be make contingent upon tuition decreases so that tuition can be reduced, thereby lowering the need for loans in the first place.