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Students seek loan forgiveness in overwhelming numbers

1.3 million Americans with $72 billion in debt have enrolled in forgiveness programs, leaving officials scrambling to find ways to reign in costs.
U.S. President Obama talks to students at the University of Iowa about the rising costs of education
U.S. President Barack Obama talks about the rising costs of student loans while at the University of Iowa in Iowa City on April 25, 2012.

Enrollment in federal student loan debt forgiveness programs skyrocketed nearly 40% in the last six months, the U.S. Education Department told The Wall Street Journal, as education costs rise.

The programs—particularly the one revamped by President Barack Obama in 2011, Pay As You Go—forgive federal student loans after borrowers have paid a certain percentage of their income for a certain number of years. They aim to make sure people aren’t prohibited from working in public sector jobs by hefty debt loads or paying loans into retirement, but they could reportedly cost the federal government as much as $14 billion a year.

Despite a sluggish job market, the cost of education has risen to seemingly astronomical rates in recent years, up 6% in 2014 alone. According to the College Board, a "moderate" budget for college topped $44,000 for private institutions and $22,000 for a public university. 

At least 1.3 million Americans are enrolled in the program, with $72 billion in debt, leaving government officials scrambling to find ways to reign in the costs of this program.

The Obama administration recently proposed capping debt forgiveness at $57,500 per student, in part to cut costs and in part, they say, because debt forgiveness shouldn’t encourage institutions to keep pushing education costs up and borrowers to take on an unmanageable amount of debt. 

But students have balked: These programs are necessary, they say, particularly for those who want to take lower-paying jobs in the public sector.

Ben Cocchiaro, a third-year medical student at Drexel University, has taken out more than $263,000 in federal student aid between undergrad and medical school to date. He expects that that number will be around $350,000 before he gets his degree and said that the public sector student loan forgiveness program is key to his future.

Cocchiaro plans to work in primary care once he graduates—he already volunteers at two free clinics in Philadelphia, in addition to his school rotations—and knows that his salary will range from around $47,000 during a three-year residency to around a $100,000 during the early part of his career. 

With loan forgiveness for public sector employees, he estimates that he will pay about $165,000 down over ten years and have the rest of his loans forgiven. If there is no debt forgiveness, he estimates he could pay as much as $800,000 total, thanks to the interest. 

Cocchiaro knows he could have to pay the full principal and interest on his loans and says “it’s a risk I'm willing to take,” to do the kind of work he wants to do, but says that his ability to buy a home or put future kids through college would be hurt by his debt burden.

“A large amount of my calculations rely on this program, because not only would I like to do good in my community but I'd also like to raise my family,” he said.

Cocchiaro also said that many doctors will likely choose higher-paying professions if these programs are eliminated.

“What you'll see is an exodus of people from diverse backgrounds leaving primary care professions in favor of a profession where they have a chance of paying back their loans a lot quicker,” he said. “I can’t blame them.”

These programs are notably one of very few ways to get out of student loan debt. Unlike consumer debt, not even declaring bankruptcy or death can remove these debts.

Private student debt is even harder to shed: New York Times report on Tuesday found that when a cosigner dies, many private student lenders are now demanding early repayment for their student loans.