NY Times Story On Cutbacks In Loan Forgiveness Programs Strikes A Chord

I have been watching the viral nature of this New York Times story that appeared yesterday "Recession imperils loan forgiveness programs."  The story notes how loan forgiveness programs, which are often set up to provide incentives for students to study in such high-need field as teaching and nursing, are threatened by budget cuts:

From Kentucky to Iowa to California, loan forgiveness programs are on the chopping block. Typically founded by their states to help students pay for college, the state agencies and nonprofit organizations that make student loans and sponsor these programs are getting less money from the federal government and are having difficulty raising money elsewhere as a result of the financial crisis.

The article highlighted the following agencies who had recently modified their loan forgiveness programs:

• The Kentucky Higher Education Student Loan Corporation is at the extreme in cutting payments to people in midstream who have already finished their educations and are repaying loans..."

• The New Hampshire Higher Education Loan Corporation has suspended its program for teachers, and the Pennsylvania Higher Education Assistance Authority has done so for nurses and people called to active duty in the military.

• Iowa Student Loan has reduced the maximum amounts offered to people in two of its three program categories, one for teachers and one for certain types of nurses, in an effort to ensure the programs will last.

• ALL Student Loan, which is based in Los Angeles, ended a program for nurses last year.

Here are the related articles that referenced this story:

• States Reduce Support for Student-Loan Forgiveness Programs  (Chronicle of Higher Education)
  

• Loan forgiveness plans give college grads a headache  (WalletPop)

• End of loan forgiveness programs troubles educators (Smart Brief)

The new Income-Based Repayment (IBR) offered for federal student loans beginning on July 1, 2009 offers loan forgiveness for those who work in public service jobs, including non-profits and government, for over ten years.  I wonder what reassurances the Dept. of Education can provide to those borrowers who see the headlines today and wonder whether this specific forgiveness program can be counted on for the long-term.

Comments

[Watchdog]

You raise an appropriate question about "what reassurances the Dept. of Education can provide to those borrowers who see the headlines today and wonder whether this specific forgiveness program can be counted on for the long-term."

It would help if the newspaper articles explained that programs like those in Kentucky, Iowa, Pennsylvania, and elsewhere were illegally conceived and financed. The underlying concept was to offer borrowers inducements -- illegal but winked at by the Bush Administration -- so as to keep both Direct Lending and Sallie Mae out of their respective states. Much of the financing was also illegal: 9.5 guaranteed loans created out of thin air, which eventually was cut off because of taxpayer outrage.

The new federal loan forgiveness program is legal. Funding is from Congress, in the mandatory category. That is a far cry from the houses of cards built by the state agencies and non-profits.

Congress needs to clear away the stench created by these entities either by doing away with them or reforming them in such a way that they can never do this again.

[Bizzaro Watchdog]

Speaking of illegal, how is it that public-service workers are the only ones who benefit from federal (taxpayer) largesse? Last time I checked, Congress could spend other people's money for the general welfare (meaning that all citizens must benefit from the spending). How is it that all citizens benefit from a narrowly-tailored "forgiveness program" benefiting public-service workers only? Moreover, what's especially distressing about this "forgivenss" program is that public-sector employee salaries now rival those found in the private sector. Could it be that Congress is doing what Congress does best--buying the votes of an organized voting block?