As Congress negotiates a bill to overhaul the federal budget, lawmakers looking to save money should note $30 billion in potential savings hiding in plain sight. The Public Service Loan Forgiveness (PSLF) program, which fully discharges the student loans of borrowers who work for the government or a nonprofit for 10 years, is one of the most expensive features of the federal role in higher education. Fortunately, there’s a way to rein in PSLF’s cost, preserve incentives for young people to pursue careers in public service, and devolve power back to the states.

How the cost of PSLF exploded

PSLF has discharged nearly $80 billion in student loans for 1.1 million borrowers. Another 2.4 million people are working towards PSLF with an aggregate balance of $214 billion, or around one-eighth of the entire federal student loan portfolio. The average PSLF borrower has $74,000 forgiven, and that number appears to be headed upwards.

PSLF’s “jackpot” structure—those who qualify have their debts forgiven in full, regardless of how much they borrowed—creates incentives for overborrowing. PSLF mainly benefits graduate borrowers, who can borrow effectively unlimited amounts from the federal government. If a student knows he will receive PSLF, every marginal dollar borrowed simply gets added to the balance that’s eventually forgiven.

Colleges have gotten in on the scheme. PSLF encourages schools to raise tuition for programs like social work, and set up new graduate programs of questionable financial value to capture more federal student loan dollars. Some institutions have actively encouraged students to maximize their borrowing in order to squeeze more money out of PSLF.

Moreover, the heavy subsidy PSLF offers to public-service-oriented fields enables states to add or maintain unnecessary degree requirements for licensed public-service occupations. Middle-class workers in government or nonprofit jobs are far likelier to need master’s degrees than their counterparts in the private sector. These licensing requirements are more often about protecting professionals in the field from competition than truly improving standards.

While proponents argue that PSLF encourages graduates to choose careers in public service, the incentives are more complex. Only individuals with significant debt benefit from PSLF, and the subsidy is tied to the cost of their degrees rather than the social value of their chosen career. Early-career public-service workers, who face the lowest pay, see no immediate monetary benefit from PSLF. The distant promise of forgiveness may not convince a recent graduate with only modest debt to choose a lower-paid job in public service.

A better way to support public servants

PSLF is expected to cost $30 billion for new borrowers over the coming decade. Eliminating the program entirely would simplify the student loan program and reduce incentives for overborrowing. Since lawmakers still desire to support public servants, they could replace PSLF with something that incentivizes public service immediately and empowers states to target funds to urgent areas of need.

Recruitment and retention for in-demand public service jobs is more about pay, including sign-up bonuses, than it is about loan forgiveness. Congress could therefore replace PSLF (for new borrowers) with a new flexible block-grant program that allows states to target funding to public service jobs where staff shortages are most dire.

Not every state has the same immediate public-service needs. California may need more firefighters, Florida more teachers. And those needs may change from year to year.

Rather than a blanket public-service benefit shoehorned into the student loan program, Congress could make funds available to states to increase compensation for their most urgent public-sector workforce needs. States could use these funds to pay workers more, offer sign-up bonuses, or improve job benefits. States could even use the money to provide loan repayment assistance, if they so choose.

We propose spending $15 billion over 10 years, distributed through the Department of Labor as a block grant to states proportional to their populations. This investment could, for instance, fund $10,000 sign-up bonuses for 1.5 million public service jobs. It would also save $15 billion relative to the current PSLF program.

Importantly, the block grant would be agnostic as to beneficiaries’ education levels. Classic public-service occupations—teachers, early childhood educators, firefighters—shouldn’t need expensive master’s degrees to do their jobs. Reimagining PSLF as a block grant would allow states to support public servants regardless of what sort of degree they have or how much tuition their university charged.

The federal student loan program is slated to cost taxpayers around $200 billion over the next 10 years, in no small part due to PSLF. By transforming PSLF into a state block grant, Congress can rein in those costs and fix the program’s perverse incentives in one stroke. President Trump has often expressed a desire to devolve federal power from the Education Department to the states. For PSLF in particular, Congress has an excellent opportunity to advance that goal.