Student Loan Forgiveness: Actually, We Already Do That
The Occupy Wall Street/Occupy Together protesters—there's a march on the Chicago Fed and Daley Plaza today at 4 pm, one of five (!) coinciding with the meetings of the Mortgage Banker Association and the Futures Industry Association—remain without official demands for now, but the idea I've seen floating around the most in response is debt forgiveness.
It's the first of Mike Konczal's three suggestions for Occupy Wall Street protestors, a central idea of protestor and anthropologist David Graeber (author of the new book Debt: The First 5,000 Years); student loan forgiveness is the subject of a stinging critique by economist Justin Wolfers at Freakonomics. Which makes sense: first mortgage debt drove the financial crisis, and now student loans are now the nation's largest form of debt. As Konczal points out, student loan debt is the number one complaint on the We Are the 99% tumblr, outpacing both health care and unemployment, probably because it's a problem for both the employed and the unemployed.
What I haven't seen acknowledged much is this: we do forgive student loans, or at least we're going to start doing it soon. Back in 2007 President Bush signed the College Cost Reduction and Access Act. Among many things, it has provisions for forgiving student loan debt if debtors are employed for ten years in a long list of fields in public service, fairly broadly defined:
Public service jobs include, among other positions, emergency management, government (excluding time served as a member of Congress), military service, public safety and law enforcement (police and fire), public health (including nurses, nurse practitioners, nurses in a clinical setting, and full-time professionals engaged in health care practitioner occupations and health care support occupations), public education, early childhood education (including licensed or regulated childcare, Head Start, and State-funded prekindergarten), social work in a public child or family service agency, public services for individuals with disabilities or the elderly, public interest legal services (including prosecutors, public defenders and legal advocacy on behalf of low-income communities at a nonprofit organization), public librarians, school librarians and other school-based services, and employees of tax exempt 501(c)(3) organizations. Full-time faculty at tribal colleges and universities, as well as faculty teaching in high-need subject areas and shortage areas (including nurse faculty, foreign language faculty, and part-time faculty at community colleges), also qualify.
It's a great boon to public-interest lawyers like my wife; after 120 months of public-interest work, whatever's left of her debt vanishes. Assuming she stays in qualifying fields, that'll be tens of thousands of dollars, perhaps over $100,000. The bill was based in part on the work and advocacy of Georgetown Law prof Philip Schrag, who explained the purpose and function of the Act in an article for Hofstra Law Review.
Looking back on it through a recessionary lens, there are some odd aspects to it. It's all or nothing: you get total forgiveness after 10 years of work, nothing if you don't make it that long. There's no accounting for spousal income, as far as I can tell. It's very straightforward and simply meant to get people to work in public service. Unlike income-based repayment—after 25 years of which debts are forgiven—there's not really any economic rationale at all.
I don't remember hearing much pushback in 2007, which makes me think that there may be political room for debt forgiveness, broadly speaking. Complete forgiveness is a pie in the sky idea, but I can envision extensions of the philosophy behind the College Cost Reduction and Access Act: for example, reducing payments further for younger or more recent grads, or expanding ten-year forgiveness to other fields. Given recent history and the convergence of We are the 99 Percent and rising student loan debt, I can see this being one of the issues to move from Occupy Wall Street to actual legislation.
Photograph: Indofunk (CC by 2.0)