President Trump’s budget proposal calls for the elimination of funding for the Public Service Loan Forgiveness (PSLF) program. The program allows for borrowers who are repaying their Direct federal student loans under an income-driven repayment plan while working full time for a public service employer to have any remaining balance forgiven after 10 years of qualifying payments. The first wave of borrowers eligible for forgiveness under this program will be applying later this year.
While this is certainly a time to be extremely vigilant, there are two things to keep in mind before panicking:
- This is a Budget Proposal – Not The Final Budget. While Presidents are free to propose budgets, Congress is the branch of government that actually has to draft and pass it. Trump’s budget proposal is a suggestion, not a final product. You may recall that even the Obama administration proposed changing PSLF in one of its budget proposals – that did not wind up happening.
- There are Legal Questions About the Viability of Defunding PSLF. PSLF is a statutory program, and can only be repealed by Congress. It is unclear whether defunding the PSLF program is enough to invalidate it. There would certainly be legal challenges if eligible borrowers are denied PSLF, since borrowers could still be legally entitled to the benefit regardless of funding, as long as the program remained intact in statute. But there’s no doubt that if the Dept. of Education refuses to grant student loan forgiveness under PSLF, it’s going to cause widespread problems.
Trump’s budget proposal also proposes changing income-driven repayment plans. Under his proposal, the multiple income-driven plans would all be combined into one single plan, with payments capped at 12.5% of income. This would represent an increase in payments for borrowers currently on the PAYE and REPAYE plans, but a decrease for borrowers on the IBR and ICR plans. Repayment terms would be 15 years for undergraduates (a substantial decrease from 20 or 25 years), but would increase to 30 years for graduate students.
So what can you do?
Now is the time for action, not panic.
- Call your congressperson and both of your Senators and tell them to preserve Public Service Loan Forgiveness and fair income-driven repayment plans for hardworking student loan borrowers in critical low-paying fields.
- Share this news with your friends and colleagues so people know about this proposal, and tell them to call their own congressperson and Senators.
- Tell your story about how vital these programs are to you, and why.
More to come as more develops.