Public Service Offers Path to Solve Student Debt and Worker Shortages

An expanded student loan forgiveness program can open the door to solving the student debt crisis and a shortage of public sector workers.  

America faces two significant problems: a substantial balance of student debt, and a drastic shortage of workers in many public sector jobs. While these two issues appear unrelated, they may, in fact, lead to each other’s solution. 

The Current State of Affairs  

President Biden’s recent move to forgive up to $20,000 per borrower has sparked a great deal of conversation. As of September 2022, the federal government holds $1.75 trillion in student loans. The estimated cost of Biden’s student loan forgiveness is roughly $380 billion. Even with this historic debt relief measure, there will still be a balance of $1.37 trillion. Clearly, the student debt problem is not going away. This becomes even more apparent when considering that the Biden administration has yet to change how higher education is financed, with student loans remaining the primary funding source.  

The picture of public sector employment is equally dim. As of July 2022, 664,000 fewer people were employed in the public sector compared to before the pandemic. In May 2022, there were just under 1 million state and local job openings nationwide. In Maryland, one does not need to look far to find stories where counties cannot fill essential positions. The primary barriers to filling these positions usually revolve around competitive pay and/or adequate education and training. 

The president’s student debt forgiveness has given a major spotlight to the dysfunction of how the US funds higher education. The benefit of that $2 trillion investment, a figure which does not include grants and state funds, is debatable. Clearly, there is a major disconnect between students finding jobs and employers finding talent. 

A Very Brief History of Higher Education Funding 

Much ink has been spilled in recent years detailing the history of student loans in the US. CNBC recently ran a compelling article detailing the history of student loans and a run-up to today’s present predicament. For a 3000-foot view, there are four key periods in the evolution of student loans. 

  • Post-WWII and The Great Society – Coming out of WWII, there was a massive investment in higher education through the GI Bill. This legislation marked the first time the government gave direct financial aid to students. The guiding thought behind the policy was that the US would need more people in specific positions to compete against the Soviet Union. From the end of the war through to President Johnson, funding for higher education expanded. During this time, both grants to institutions of higher education and student loans made up the bulk of the investment. 
  • The Regan Years – When President Regan came to power in the 1980s, many things changed in Washington. As part of the new philosophy of shrinking government, many social programs found themselves either on the chopping block or becoming markedly slimmed down. As part of a compromise to keep investment in higher education but slim government spending, the student loans were expanded and grant programs curtailed. Loans would primarily come from the private sector and be back by the federal government. From this era, we begin to see large growth in student debt. 
  • Clinton and Bush – Both Presidents Clinton and Bush put forward programs to simplify how student loans were administered and paid back. President Clinton spearheaded early income-driven repayment plans and public service debt forgiveness. President Bush allowed for the early expansion of online education, opening up new educational opportunities but also increasing the national student debt. During the 2008-2009 financial crisis, state funding for higher education was slashed. 
  • Obama – President Obama fundamentally transformed how the student loan program was administered by having the federal government became the dominant force the industry. Up to this point, student loans were primarily held by private banks. Under President Obama, the federal government became the issuer and holder of student debt. This period also saw a significant increase in the cost of tuition, and the amount of student debt held by the federal government ballooned. 

The Problem 

The problem is clear – the federal government has spent nearly $2 trillion on the student loan program, and yet there exists an almost existential imbalance in the demand and supply of workers in both the public and private sectors. Employers cannot find workers, and students are carrying ever-increasing debt burdens. Furthermore, high debt burdens push many workers to seek higher-paying jobs, leading to an escalating list of vacancies. 

 According to Gallup:

  • The cost of replacing an individual employee can range from one-half to two times the employee’s annual salary — and that’s a conservative estimate. 
  • So, a 100-person organization that provides an average salary of $50,000 could have turnover and replacement costs of approximately $660,000 to $2.6 million per year.

The main program aimed at solving the mismatch between public workforce shortages and high levels of student debt is Public Service Loan Forgiveness (PSLF). The criteria for meeting the threshold of PSLF are so stringent that, “Only 211,000 workers have qualified under this program since 2017, far short of the 40 million granted relief by the Biden program.”(Governing) It is evident that how we choose to invest in higher education isn’t working as intended.  

Possible Solution – Expanded Public Service Loan Forgiveness 

Girard Miller recently proposed an innovative and targeted solution to fixed both problems. Miller’s solution is for state and local governments to push for a limited but significant expansion of the federal PSLF program. Jobs categories that prove to be particularly difficult to fill will be eligible for increased benefits and forgiveness under the program. This targeted approach would direct investment toward categories that demonstrate the greatest need, such as teachers, engineers, and environmental health workers, while avoiding easy-to-fill positions such as entry-level accountants and professional emergency services in more affluent areas. To implement the program, state and local governments would need to track vacancy rates, application flow, and recruitment statistics, which would then warrant a declaration of worker scarcity. While the program may be expensive in the short term, the long-term benefit of its implementation would far outweigh the cost of not filling critical positions. 


There is no debate that there is a market mismatch between the diplomas we are printing and the jobs that go unfilled. Ballooning debt is holding back the economic prosperity of many and often makes the situation around public sector vacancies worse. The history of and solutions to the college debt crisis is much wider than what was covered in this article, and the program proposed above would be very targeted and limited in its relief. But this program can go some way in solving two issues plaguing the next generation of workers and local governments.