Last week, the Washington Post reported that the Trump administration plans to include a potentially big blow to student loan borrowers in its education budget proposal: an end to the Public Service Loan Forgiveness (PSLF) program.
Unveiled in 2007, PSLF is currently slated to begin awarding federal student loan forgiveness to eligible public sector and nonprofit works later this year. At first, the report suggested those plans may be in jeopardy. however, more details have emerged that indicate current federal student loan borrowers will still be able to receive forgiveness through PSLF. The proposal would only impact new borrowers on or after July 1, 2018.
According to the latest Public Service Loan Forgiveness statistics, 552, 931 borrowers have been approved and are potentially slated to receive forgiveness through PSLF.
Here’s what we know now:
Not yet, at least. Currently, this is merely a proposal put forth by the Trump administration. While this certainly isn’t encouraging for the PSLF program, the president does not make the budget. That’s up to Congress.
In other words, before there are any changes to PSLF, Congress must take action.
Based on a May 23 conference call with reporters, this proposal would not impact current borrowers who are looking to receive forgiveness through PSLF. Borrowers currently on track to receive forgiveness through the program should be able to do so as originally outlined. The proposal would only impact borrowers who take out their first federal student loan on or after July 1, 2018, according to the Washington Post.
This means that anyone who’s already borrowed federal loans should remain eligible for PSLF as well as anyone who begins borrowing prior to July 1, 2018. It appears that whether or not borrowers begin making PSLF-eligible payments or submitting Employment Certification Forms by this deadline would not impact eligibility. Only the borrowing date would matter.
The report from the Post also indicates that the Trump administration plans to eliminate the current income- driven repayment options including Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn, Income-Contingent Repayment, and others.
For undergraduate degree holders, the proposal would reportedly replace these programs with a single income-drive option that would cap payments at 12.5 percent of discretionary income while offering forgiveness after 15 years. If this plan is offered, this could be good news for student loan borrowers as it may result in greater amounts of forgiveness over a shorter repayment term.
The news isn’t so great for graduate degree holders, who would enjoy the same 12.5 percent payment cap, but would need to do so for 30 years before receiving forgiveness.
No matter which side of the political aisle you stand on, eliminating PSLF would be bad news for borrowers. With mounting student loan debt that’s been compared to the recent housing bubble, borrowers need better - not fewer - options for relief.
While any potential changes to the program are likely far off, make your voice heard by contacting your Congresspeople and letting them know that you want to keep PSLF intact.