Update: Counting on Student Loan Forgiveness? Think Again
May 30, 2017: Please note the following clarification regarding the student loan forgiveness program in the President’s budget proposal from the Office of Management & Budget (OMB):
The Budget proposes to simplify student loan repayment by consolidating multiple Income Driven Repayment (IDR) plans into a single plan. The single IDR plan would cap a borrower's monthly payment at 12.5 percent of discretionary income. For undergraduate borrowers, any balance remaining after 15 years of repayment would be forgiven. For borrowers with any graduate debt, any balance remaining after 30 years of repayment would be forgiven. To support this proposal, the Budget eliminates the Public Service Loan Forgiveness (PSLF) program, establishes reforms to guarantee that all borrowers in IDR pay an equitable share of their income, and eliminates subsidized loans. However, the Budget retains loan forgiveness for teachers who teach in high need schools or subjects. The Budget also expands benefits for eligible Pell recipients by supporting Year-round Pell. The Budget does not propose retroactive elimination of PSLF. Participants enrolled in the program prior to enactment of legislation to eliminate the program will continue their participation in the program, with an option to enroll in the new IDR plan.
The Department of Education (DOE) is reportedly planning to end the Public Service Loan Forgiveness Program which promises to cancel any remaining student debt for government employees who made on-time payments for 10 years.
This October marks the 10th year of the program and the first time anyone would be able to have their debt cleared. Officials are uncertain how much the program will cost the government when it starts to forgive these debts.
The Washington Post obtained budget documents last week and broke the news of the program’s fate. A public version of DOE’s budget will likely release this week, but Congress would have to first approve the changes in order for them to go into effect.
"It would be absolutely detrimental to those of us who have planned our lives around this program. It would be the equivalent of pulling the rug out from under us," said Daniel J. Crooks III, a government attorney who is expecting loan forgiveness for his $300,000 in debt from the public service program in six years.
The Obama Administration proposed capping the amount borrowers could have forgiven at $57,500, but that proposal was never approved and forgiveness remains unlimited.
According to a Brookings report, the median borrower in the program has more than $60,000 in student debt and almost 30 percent of them have more than $100,000 in debt.
"With student debt hanging over them, it might not be financially possible for recent grads to commit to public service careers," he said.
Posted in General News
Tags: federal budget cuts, student loans, Public Service Loan Forgiveness