Your Tax Dollars at Work: The Effectiveness of the Public Service Loan Forgiveness Program

Abstract

As of March 2024, the Federal government has forgiven $62.5 billion of Federal student loans for over 871,000 individuals—roughly $72,000 per borrower—enrolled in the Public Service Loan Forgiveness (PSLF) program. We study the impact of the PSLF program on nonprofit effectiveness. We find the program ratio, defined as the proportion of dollars directed toward mission fulfilment, increases after PSLF implementation. Additionally, we document program ratios increase because of newly hired program employees, consistent with nonprofits expanding their workforce to provide more mission related services. Finally, we estimate the incremental program employee output attributable to the PSLF program, finding it exceeds the average loan forgiveness by the Federal government in 94% of nonprofits in our sample. Overall, we provide evidence consistent with the PSLF program promoting nonprofit employment and increasing organizational effectiveness across the nonprofit sector.

Keywords: Nonprofit, Program Ratio, Student Loan, Public Service Loan Forgiveness, IRS Form 990