OnWatch is a quarterly newsletter of the Fleet Reserve Association

July 1 2018
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Public Service Loan Forgiveness at Risk
A commonly overlooked program that certain active duty service members qualify for is the Public Service Loan Forgiveness (PSLF) program. The PSLF program was implemented in 2007 to encourage people earning expensive college degrees to pursue full-time employment in certain public service jobs. After working continuously for ten years in these public service jobs, which includes active duty military service and making regular monthly federal loan payments over 10 years (120 months), borrowers can apply to the U.S. Department of Education to have any remaining federal school loan balances forgiven. 

The PSLF program is at risk of a major overhaul. Congresswoman Virginia Foxx (N.C.-5th), Chair of the House Education and the Workforce Committee, introduced a bill known as the “Promoting Real Opportunity, Success, and Prosperity through Education Reform Act” or “PROSPER Act” (H.R.4508). Among the bill’s many provisions, it includes a sunset clause on the student loan forgiveness benefit program, which includes active duty service members. As a consequence, the PSLF will no longer exist. Lawmakers who support this bill say it will cut down on burdensome regulation and unnecessary reporting requirements for institutions. Opponents of the bill say it will be easier for schools operating for-profit to take advantage of service members and veterans. The Department of Defense (DoD) says it will hurt recruiting efforts. 

According to the DoD, the PSLF is an important recruitment and retention tool for the military to compete with the civilian sector. Approximately 6,800 service members (2,500 Navy & Marines) are anticipating having their student loan debt forgiven through the PSLF program. As of right now, borrowers currently using federal direct student loans would be grandfathered into the legislation and would not be affected if the program is cut. However, those who were thinking of taking advantage of this program will need to find another way to repay their federal student loans. With the increasing cost of a higher education, the elimination of the PSLF program would adversely affect anyone considering public service as a career. The PSLF can apply to both undergraduate and graduate degrees but if it is discontinued it will disproportionately impact those in specialty fields. Such specialty fields include Judge Advocate General’s Corps, enlisted personnel and Navy civilians pursuing advanced degrees, the Naval Nuclear Propulsion Program, Chaplain Corps and Health Professions communities.

Opponents of the bill argue that this is a giveaway to predatory programs. These advocates said the legislation would make veterans more vulnerable to for-profit colleges of questionable quality. The bill also targets other consumer protections like the current incentive compensation ban for recruiters hired by for-profit programs. Current Federal law bars colleges from paying bonuses to recruiters based on the number of students enrolled. Without this protection, recruiters will be incentivized based on their own best interest and not those of the prospective student. 

One of the protections veterans want to see continued or improved upon is the so-called 90/10 rule, which maintains that a for-profit institution can generate no more than 90 percent of its revenue from federal student aid and 10 percent must come from non-federal sources. Veterans’ groups have been pushing for years to have Congress change this to at least 85/15. Because to eliminate it, which the PROSPER Act would do, would allow higher educational institutions to receive funding from G.I. Bill benefits without having it count against their federal revenue cap. That makes enrolling active duty and veteran students especially profitable for many institutions and could lead to aggressive recruiting tactics.

Numerous Veterans’ organizations say Congress should be strengthening those protections for students, not removing them. The Congressional Budget Office reported that the PROSPER act could lead to students losing $15 billion in federal student loans during the next 10 years. Some positive aspects of the bill include updates to the accreditation system, an overhaul of the cohort default rate and expanding Veterans’ eligibility for the Federal Work-Study program. 

The PROSPER Act, would dramatically overhaul both the federal student aid system and the tools used by the federal government to hold institutions receiving those funds accountable. Veterans’ groups, including FRA, have often led the way in advocating for; nontraditional students (those who start college later), students with family obligations and may not attend full-time, and pushing for consumer protections. FRA was instrumental in the legislative development and passage of the Post 9/11 G.I. Bill (2008) and supported the Forever G.I. Bill (2017). It is bills such as the PROSPER Act that can dramatically affect service members when they are on active duty and when they become veterans. It is always important to stay vigilant to what changes can come out of Congress, and remember, what Congress gives Congress can take away.

There are specific guidelines about the types of federal loans that can be forgiven and under what circumstances. For more information about the PSLF program and to find out if you qualify, please visit the department of education websit. 

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ABOUT ONWATCH

OnWatch is a quarterly news update for active duty and Reserve personnel, written by Brian Condon. He served four years on Active Duty in the Marine Corps. Condon began his career with the Fleet Reserve Association (FRA), as Assistant Director of Veterans Programs on October 2015.  He is committed to FRA's mission to maintain and improve the quality of life for Navy, Marine Corps and Coast Guard personnel and their families. You can reach Brian directly on any of FRA's advocacy issues at BrianC@fra.org