Public Service Loan Forgiveness and the Care Economy: Expanding Eligibility for Gender and Racial Equity

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I. Expanding PSLF Eligibility: Defining Public Service In The Private Sector

The U.S. Department of Education (ED) and representatives from key constituencies are currently engaged in negotiated rulemaking, a collaborative process the Department uses to revise federal education policies. One of the programs under consideration is the Public Service Loan Forgiveness (PSLF) program, which forgives student loan debt after ten years of employment in a public service profession. PSLF has long been beset by confusing guidelines and complex procedures that have prevented public service workers from attaining the forgiveness they were promised. Although the Department of Education announced a temporary waiver in October 2021 that retroactively broadens forgiveness and current proposals aim to improve the program going forward, there are critical issues around eligibility that have to date not been adequately accounted for.

Currently, PSLF is available to those who are directly employed by the government (a local, state, or federal agency) or by a non-profit organization. It defines an employee as “an individual who is hired and paid by a public service organization.” It also extends forgiveness to employees of “private organizations” that provide qualifying “public services,” provided that the organization “is not a business organized for profit.” These qualifying public services are:

Emergency management, military service, public safety, law enforcement, public interest law services, early childhood education (including licensed or regulated child care, Head Start, and State funded pre-kindergarten), public service for individuals with disabilities and the elderly, 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, as such terms are defined by the Bureau of Labor Statistics), public education, public library services, school library or other school-based services.

The exclusion of workers who are classified as contractors or who are employed by for-profit entities excludes public service workers who demonstrably perform important public service work, often largely in the care economy. A significant number of workers in public service professions are also classified as independent contractors, particularly in the healthcare field.

Research suggests that the private provision of public services and the independent contractor economy are both long-term trends that are likely to continue and even accelerate.4 Trends toward privatization and contract-based employment in these industries further heighten the need for the Department of Education to revise these guidelines to ensure this important program remains in-step with the rapidly changing modern economy.

Therefore, the N. Joyce Payne Center for Social Justice at the Thurgood Marshall College Fund proposes:

  • Striking the provision that excludes for-profit businesses, given the significant proportions of healthcare, child care, eldercare, disability services, and other care workers employed by private sector companies, as illustrated in Table 1. It also recommends broadening “public education” to “education” more generally, to include education workers in the private non-profit and private for-profit sector.
  • Extending PSLF eligibility to full-time workers who work as independent contractors (those who file a 1099 tax form) with one or more qualifying organizations if they contract full-time with an organization that performs one of the qualifying public services listed above.
    Modifying these two provisions will help to make access to loan forgiveness more equitable for people who perform similar roles at public and private sector organizations or who perform similar roles despite employment classification status. It will also help address racial and gender disparities in student loan burdens, as women and workers of color are overrepresented in many public service fields and more likely to be classified as contractors.

While this paper focuses on care work industries due to both their size and their proportions of women and workers of color, the private-public and employment classification disparities should be eliminated in all qualifying professions. Protective services, emergency management, and public interest law, for example, have some labor segments that are either contract-based or organized as for- profit entities. This will create more equitable benefits for public service workers at different organizations and allow workers greater flexibility to move between organizations within their field.

II. For-profit Care Work In Context

Because of the United States’ unique history of privatizing the care work sector, this is the largest and most important blind spot for the current PSLF eligibility rules. Services like child care, elder care, disability services, education, health care, and social work are central to a society’s health, wellbeing, and economic prosperity. As a result, many other countries have treated care work as a universal public benefit, rather than something that is provided to those who can afford it by the private market. While most high-income countries offer “a stronger universal public provision” for care work in the way that the U.S. offers public K-12 education, the U.S. “rel[ies] on market mechanisms for care service delivery.” Publicly-funded models tend to result in higher coverage and better labor protections, higher wages, better benefits, better training, and lower turnover. Although Congress is currently considering greater public investment in the care economy with the Build Back Better Act, several sectors have been largely served by for-profit organizations, as section III shows.

Furthermore, the industries under consideration already have some scale of existing government investment or public provision of services. The childcare and eldercare industries, for example, are served by a mix of private and public providers. Public funding often helps subsidize these services for low-income families through programs such as Head Start or Medicaid support for long-term residential nursing care. In industries in which the government does not currently play a role, either through direct provision of services or contracting, the market evidently provides an effective and profitable solution for those public needs.

Existing government support signals two realities about care work industries: first, that they are a public good and, second, that many operate as market failures.9 Much of this work is labor-intensive, in-person, and individualized, which prevents it from being automated or outsourced and keeps costs high. Childcare, for example, costs between 30% and 102% of a minimum wage workers’ salary, depending on the state.10 This then creates a rational incentive for a caretaker to leave the formal workforce and provide this service directly. The broader positive externalities that care work enables beyond its immediate value, which society as a whole benefits from (e.g., allowing a parent to stay in the workforce vs. the hourly cost of care) also supports the nature of care work as a public good.

For the rest of this report, including Privatization of Selected Public Service Organization Types and Public Service Work Salaries By Organization Type, please download here.