Which meant that when the loan forgiveness window finally opened in October 2017, the only people who were legally eligible were a kind of rare, immaculate borrower: someone who had not only made all of the loan payments, in full and on time, for 120 consecutive months, but had also (unusually) taken out exactly the right kind of loan, and (improbably) gotten immediately into exactly the right kind of repayment plan, and (very luckily) never once experienced a debilitating servicer error of any kind.
And, this perfect borrower had to have been employed in a public service job the entire time. This also turned out to be a source of confusion. While plenty of blame can be directed at Congress for designing a confusing program and at loan servicers for carrying out the program poorly, the truth is that many of the applicants hadn’t been public servants for all of the previous decade.
Why, then, does the Congressional Budget Office keep raising its estimated cost of the forgiveness program? The numbers are startling. In 2016, the C.B.O. estimated the annual cost of providing graduate school loans to be $4 billion. The next year it revised it to $6 billion. Last year the number jumped to $8 billion. This year, it’s up to $12 billion — all because the C.B.O. keeps increasing its estimate of how many public service loans the government will eventually write off.
In part, it’s simply a matter of time. If you thought you made 120 qualifying payments, but really only made 110, you can make 10 more and apply again. Some of the people initially rejected will have their loans forgiven this year or next. Future applicants will need to be less immaculate as time goes on. Servicers may get better at their job.
But the other big reason for the rising price is that lawmakers weren’t done tinkering with student loans back in 2007. Far from it. They continued to add and adjust, each time making the program more complicated and expensive.
A rising tide of forgiven loans
The first big change came in 2010, when Congress got rid of the subsidized private bank loan program. All new loans would be Direct Loans — and thus, eligible for the forgiveness program. At the same time, Congress made the forgiveness program much more generous, by reducing monthly loan payments under income-based repayment to 10 percent of discretionary income, from 15 percent.
Congress never gets rid of old ways to repay student loans. It just creates new ones. The 2007 law created what we’ll call Old I.B.R (Income-Based Repayment), in which you pay 15 percent of income. The 2010 law created New I.B.R., in which you pay 10 percent. New I.B.R. wasn’t supposed to be available until 2014. But some clever Obama administration lawyers figured out how to create another repayment option out of whole regulatory cloth that mirrored New I.B.R but was available sooner.