The Economics of Education
Student debt has become a pressing economic, and political issue in recent decades as the costs of higher education have risen much faster than nearly every other sector. Currently, the overall average costs of a student year in all colleges and universities are approximately $22,000. In this environment, a typical graduate can amass $110,000 in debt from pursuit of a four-year college degree and a one-year graduate degree or other specialization. For professional certification in medicine, law and advanced education degrees, the total can easily exceed $180,000. Those, who must borrow substantial amounts of the needed funds, face an enormous burden of debt upon completion of studies.
Policies to Ease Debt
Depending on overall economic conditions, clearly a matter beyond the control of recent graduates, the prospects for employment may be difficult. Against this factual background, both federal and state governments have moved to adopt policies that help young graduates handle school debt, and this includes policies favoring debt forgiveness. The federal government has introduced flexibility and policies that tie the repayment to the amounts earned. Three bases exist for formal forgiveness: public service, disability, and teaching.
Public Service Loan Forgiveness
Established in 2007, the current programs require 120 consecutive payments towards the balance due on student loans. The first dates of actual forgiveness will occur in 2017. Applications are not available. However, certifications of public service employment are available and can be sent to the registration location. The goal of the program is to encourage graduates to accept and work in public service positions. These include government-sponsored efforts like the Peace Corps, but also many non-government organizations that work for the public interest, such as community-based organizations providing housing for the homeless, and local employment training initiatives.
Teacher Loan Forgiveness
One of the ambitious efforts to encourage highly qualified teachers to work in schools that serve underprivileged communities. It is a program that rewards persons who enter and remain in the teaching profession for five consecutive years and who teach in elementary or secondary schools that serve low-income communities. The total forgiveness can amount to as much as $17,500. There are incentives aimed at highly qualified teachers and teachers in areas of academic need such as math and science.
Total and Permanent Disability
The law provides for discharge of student loan debts for persons who are totally and permanently disabled. Because they cannot pursue a livelihood, the policy is to reduce financial burdens by discharge of federal student loan debt. The policy applies to veterans with a service-connected disability, persons with a limiting physical or mental impairment that is expected to last 60 months and which make it medically impossible to engage in employment.
Expansion of Forgiveness
State and the federal government have considered methods to relieve the heavy economic burdens of student debt. For example, the State of New York currently considers a plan to pay part of the student debt for its graduates. This proposal would pay up to two years of payments for New York college graduates earning less than $50,000. The federal government has adopted expanded forgiveness options that can reduce remaining balances after participation in the pay-as-you-earn programs. Pay-as-you-earn caps required payments at a percentage of income; forgiveness erases the balances after 20 years of payments. The policy revisions would extend forgiveness to an additional five million borrowers who began borrowing before 2007 and completed before 2011.