Home > Uncategorized > DeVos-Trump Budget Reneges on Loan Forgiveness, Balancing the Budget on the Backs of Public Sector Employees

DeVos-Trump Budget Reneges on Loan Forgiveness, Balancing the Budget on the Backs of Public Sector Employees

An element of the DeVos-Trump budget that has not gotten nearly enough coverage is the Department of Education is planning to propose ending the Public Service Loan Forgiveness Program. As described in last week’s CNN Money blog post by Kate Lobasco, these cuts would impact 400,000 graduates who paid their debts on time for ten years and work in public sector jobs as “…teachers, public defenders, Peace Corps workers, and law enforcement officers”.  As Ms. Lobasco indicates:

This October marks the 10th year of the program and the first time anyone will have made enough payments to get their debt wiped away. It’s unclear how much the program will cost the government when its starts to forgive those debts…

The program could cost the government more than originally expected, according to the Government Accountability Office. The Obama Administration had proposed capping the amount borrowers could have forgiven at $57,500, but that proposal was never approved and forgiveness remains unlimited.

The median borrower in the program has more than $60,000 in student debt and almost 30% of them have more than $100,000 in debt, according to a Brookings report.

The article describes the complications the USDOE ran into when they implemented the law, complications that led to confusion on the part of borrowers and lenders and contributes to the inability of anyone to determine what the cost impact would be. When that is the case, the path of least resistance is to spend nothing at all… to effectively renege on the offer made to many students who chose to attend college or graduate school to work in lower paying public sector jobs… or “government jobs” as they would be disparagingly referred to by at least one political party.

And the latest news out of Washington indicates that the USDOE is not going to be offering clear answers on the issuance of loans anytime soon. As reported in a Washington Post article earlier this week, James Runcie, who was appointed chief operating officer of the Office of Federal Student Aid in 2011 and reappointed in 2015, resigned from that post on Wednesday. According to the article “He had planned to retire by the end of the year, according to people who know him, but clashes with the new Trump administration forced his hand.” Those clashes were described in the article as follows:

Runcie said in the letter that the student aid office is contending with pressing projects. Among them: weighing a student-loan-servicing contract bid, shoring up cybersecurity, building out the expansion of the Pell Grant program, tending to loan forgiveness for defrauded borrowers and getting the tax-data-retreival tool in the financial aid application back online. He said his team has asked DeVos to hire staff for additional help but has yet to receive a response.

Instead, Runcie said, the Trump administration has been preoccupied with transferring all or a portion of the functions of FSA to the Treasury Department. Runcie said there have been discussions about creating cross-agency teams, holding numerous meetings and retreats to determine feasibility.

“This is just another example of a project that may provide some value but will certainly divert critical resources and increase operational risk in an increasingly challenging environment,” Runcie said of the Treasury collaboration.

He went on to thank his team but said he has been “encumbered from exercising my authorities to properly lead” and could no longer “in good conscience continue to be accountable as the chief operating officer given the risk associated with the current environment at the department.”

The foot-dragging on hiring, which has been a hallmark of the Trump administration in those departments that are not favored by the GOP, has real world consequences for students, who have been experiencing serious difficulties completing loan applications for the coming year, including the paperwork needed to determine the amount of funding they are eligible to borrow. But when a political party bases its platform on the fact that “government is the problem” it is not surprising that they fail to hire the staff needed tomato government succeed.

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