The future of the Public Service Loan Forgiveness (PSLF) program is uncertain under the Trump Administration, but eliminating the program would bring negative consequences to Illinois’ workers and economy.
Created in 2007 during President George W. Bush’s second term, the Public Service Loan Forgiveness (PSLF) program subsidizes federal student loan repayments for workers employed by the public sector and eligible nonprofit organizations. The program is intended to encourage individuals to enter and continue to work in public service occupations, which tend to be lower paying than comparable private sector jobs.
Congressional officials have floated eliminating PSLF to cut federal spending and balance the budget in the wake of tax cuts that would increase the deficit by $1.5 trillion. Tax cut plans currently introduced in Congress would eliminate the student-loan interest deduction and would raise new taxes on tuition waivers – which would impact 145,000 graduate students who receive waivers to cover tuition. These cuts are opposed by universities and higher education groups.
In addition to cuts introduced in Congress, one of President Trump’s proposed education budget cuts pertains to the PSLF program, which would be eliminated for individuals who take out student loans on or after July 1, 2018. Those who are already enrolled in the program would remain eligible for forgiveness.
The Illinois Economic Policy Institute (ILEPI) and The Project for Middle Class Renewal (PMCR) at the University of Illinois at Urbana-Champaign released a new report, The Consequences of Abolishing the Public Service Loan Forgiveness Program: Estimating Impacts in Illinois, on the impacts of eliminating the PSLF for Illinois.
The report finds that Trump’s budget proposal to eliminate PSLF would have a negative impact on workers and businesses in the Illinois economy.
- There are approximately 21,000 workers aged 25 to 34 in Illinois who benefit from the PSLF program– including teachers, librarians, social workers, psychologists, detectives, fire marshals, scientists, public works engineers, researchers, and religious workers, among many others.
- These workers earn an average income of just over $50,000 annually but face an average of about $80,000 in student loan debt.
Public service workers who benefit from PSLF have higher levels of educational attainment compared to their private sector counterparts, yet tend to earn a lower annual salary.
- In Illinois, the share of PSLF-eligible young workers with a master’s degree is 36 percent; nearly double the amount of university-educated young workers in the private sector (19 percent).
- The median salary of PSLF-eligible workers aged 25 to 34 is $48,000, with the top 10 percent of earners taking home $77,000 or more. By contrast, full-time individuals ages 25 to 34 with bachelor’s degrees or more in the private sector earn a median salary of $55,000, with the top 10 percent of earners making $110,000 or more.
The PSLF program puts more money into the pockets of Illinois workers.
- A public service worker earning the average salary of PSFL-eligible workers and facing the average PSLF student loan debt pays $618 less per month in student loan debt than he or should would without the PSLF program.
- The annual benefit to the average PSLF borrower is over $7,420, or more than $74,000 over ten years.
The PSLF program stimulates the Illinois economy.
- PSLF borrowers currently have over $125 million more in their pockets due to lower monthly student loan payments – money that can be spent at local retail stores, at restaurants, paying medical bills on automobiles and better apartments, or on health insurance in the marketplace.
- The PSLF program saves or creates nearly 1,300 jobs annually, boosts home sales by $15 million every year, and enables over 1,500 young workers the ability to rent in the Illinois economy, rather than living at home with their parents.
Cutting the PSLF program would eliminate these positive benefits, shrinking the Illinois economy and resulting in job losses in the state.
The Trump Administration and Illinois’ congressional delegation must consider the negative economic impacts of abolishing the Public Service Loan Forgiveness program before cutting the program. Eliminating the program would be bad for workers and businesses across Illinois’ economy.