I’ve been getting a lot of inquiries about possible changes to federal repayment and forgiveness programs proposed by the Obama administration recently. There’s a lot of panic out there. I’ve put together a concise, straightforward summary of the proposals and my own thoughts on it. I hope this will reduce some of the fear and misinformation that’s been circulating.
First, some background. As part of the budget proposal for the 2015 fiscal year, the Obama administration has proposed various reforms to federal student loan repayment and forgiveness programs. Before we even get into the details, let me point out a few important things:
- This is a budget proposal. This is not a bill or a piece of legislation, this is not a court decision, this is not an executive order. In other words, this has no force of law. It is simply a proposal, a starting point, a recommendation.
- This is a budget proposal during an election year with a divided government. This means that, practically speaking, the final product will probably be significantly different. Who knows what the final budget will even look like? I certainly don’t.
- The entire budget process is incredibly slow and tedious. Whatever the final product is, we may not even see it for a year or two, or longer.
- Any substantial material changes to federal student loan programs will require an act of Congress, signed by the President. We are nowhere near that point.
So, with all that being said, let’s get into the details. This specific proposal actually has two very good elements to it, which I think we can all get on board with: