Is Public Service Loan Forgiveness Getting Cancelled?

How to Help Your Employees Navigate Their Student Loan Forgiveness Options

The recent 2021 federal budget proposal put forward by the Trump administration would eliminate many existing U.S. Department of Education programs, including Public Service Loan Forgiveness (PSLF). Public Service Loan Forgiveness is a federal student loan forgiveness option that is offered to teachers, educators, nonprofit workers, and government employees. This program plays a crucial role in both recruiting new employees into public service roles and keeping them in those roles for ten years to reap the full benefit. Many public service employees are banking on and are relying on this program for their financial future.

Taking this forgiveness option away from educators and public service employees would be disastrous to the individuals who are giving their time, talents, and energies to public sector jobs, many of whom forgo much higher paying private sector roles to serve their community. Eliminating PSLF would also negatively impact the education and public service sector by lowering the overall financial sustainability of public service positions.

Educators, for example, will be especially hard hit. According to a New York Times poll, 78% of Americans say that educators aren’t paid enough. In addition, according to a survey conducted by Holberg Financial, 95% of educators say that financial stress has negatively impacted their ability to perform to the best of their ability for students. While improving the compensation of educators isn’t a simple fix, PSLF is a pathway for making education-related roles more financially viable. For example, a teacher making $50,000 may have $37,000 in student loans (this is the national average debt load for undergrad loans - not including post-grad loans). They’ll have to make payments for 10 years and let’s assume they’ll still have roughly $28,000 left after 10 years. If that teacher successfully pursues PSLF, they would get the remaining balance of $28,000 forgiven, which is equivalent to an extra $2,800 each year.

95% of educators say that financial stress has negatively impacted their ability to perform to the best of their ability for students.

That’s equivalent to a 5.6% salary increase to $52,800, a sizable and motivating amount for educators and public servants who wish to stay in the careers that they love. Taking Public Service Loan Forgiveness away will lower the overall financial incentive for public servants, and while their heart may yearn to stay in education, non-profit organizations, or government roles, their wallet may have other plans. Sadly, a whopping 40% of educators surveyed said they were considering leaving education because of financial stress and concern, according to another poll from Holberg Financial.

There is a lot of confusion about student loans out there, but one resource you can share with employees right now is our Public Service Loan Forgiveness explanation video. This is one of over 50 educational video resources that Holberg Financial has covering the full spectrum of personal finance, including student loans, savings, reducing credit card debt, and more.

Public Service Loan Forgiveness explanation video

What if PSLF doesn’t get cancelled? Should I still worry about my employees?

Yes. Even if PSLF doesn’t get cancelled, educators and public servants still face financial stress and challenges related to managing student loans, dealing with other forms of debt, and struggling to save and plan for the future.

Here are a few key questions your employees may be asking themselves with regards to student loans:

1. Can I afford my monthly payments?  Many employees are burdened with huge monthly student loan payments that make budgeting tight and savings prospects dim. They can access income-driven repayment plans, but many employees don’t know what options exist and even fewer know how to access the Federal Student Aid website to apply for consolidation (which is often a necessary prerequisite to entering an income-driven plan to lower monthly payments).

2. Which student loan forgiveness program is best for me? Public Service Loan Forgiveness is not the only federal student loan forgiveness option. For educators, there is the Teacher Loan Forgiveness Program and Teacher Loan Cancellation. The differences between these programs and which is best for each individual are nuanced and challenging to determine. As part of our financial education resources, we have developed video resources to educate and help employees navigate the different student loan forgiveness options.

The Holberg Financial education resource platform has 50+ videos and more.

3. Should I refinance my student loans? Educators and public service employees may not know the difference between refinancing and consolidation. Refinancing is moving your student loans to a private lender like SoFi, Credible, etc. Sadly, once you refinance with a private company, you lose the ability to get any federal student loans forgiven, forever. SoFi, Credible, Earnest, and other lenders are spending billions of dollars in advertising trying to get people to refinance with them, and once you do, you can’t undo that agreement, sacrificing many benefits and safeguards of having federal student loans. Consolidation, on the other hand, is combining all of your federal student loans via Federal Student Aid website into one loan with a fixed interest rate. After consolidating, not only are you still eligible for student loan forgiveness, but payments can be streamlined, simplified, and you can opt for other federal student loan benefits.

What can I do to help my educators and public service employees?

Knowledge is power. Student loans are confusing and challenging to manage for everyone, but providing resources to help educators understand how to most efficiently pay them off is vital to their financial wellbeing. Most people take out student loans at age 18, and yet are still trying to pay them back well into their 40s. Holberg Financial’s educational resources are a great first step to getting your employees the information they need to make informed decisions, lowering their financial stress and increasing their confidence, knowledge, and job satisfaction.

Holberg Financial is now used by over 5,000 educators and nonprofit employees across the United States. Many of America’s most successful and prominent charter networks, including Noble Charter Schools and KIPP, as well as other educational organizations such as Teach for America, rely on HF to help make teaching more financially viable for employees over the course of their careers.

“I think everybody needs to be doing this. It's cost effective. It helps with retention. It helps with recruitment. It helps from a human level in creating happier people and more sustainable people and of course this all trickles down to helping kids. I am a huge believer of this and I'm glad to have Holberg Financial working with the KIPP community.” - Michael Salmonowicz, COO at KIPP Chicago

Equip and support your team to better handle their financial stress with HF’s Financial Education Resources. Regardless of whether future federal budget cuts eliminate Public Service Loan Forgiveness, educators still need the education, resources, and one-on-one support to improve their finances and continue serving in the education and the public sector roles they love.

If you’d like to learn more, schedule a time to speak with a member of our team here and take the first step towards eliminating the financial stress that burdens so many teachers.

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