As to the public service employee part, its just a background way of raising their pay.

Reader comment on: Obama Student Loan Repayment

Submitted by Lyle (United States), Jun 10, 2014 20:00

So in one sense it is a subsidy for other governments and non profits that allows them to pay less than they otherwise would have. Note of course that at the end of 20 years there is income tax due on any foregiveness so that 15%+ of the forgiven amount will go back to the treasury. (just like after dec 31, 2013 if you short sell a house you get a 1099 for the forgiven amount)

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