The Trump administration released a budget blueprint yesterday, outlining how it wants Congress to address government spending. The proposal calls for sweeping changes to student loan programs – reforms that would have a major national impact. Here are some specifics:
- Public Service Loan Forgiveness (PSLF) would be eliminated.
- Current Income-Driven Repayment (IDR) programs like Income Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) would be eliminated, and a new IDR plan would take its place. This plan would have payment amounts somewhere between PAYE/REPAYE and IBR, with a shorter repayment term (15 years) for undergrads and a longer term (30 years) for grad students.
- Subsidized federal loans would be eliminated, meaning all federal loans would accrue interest at all times, even during periods of in-school deferments.
The bill also proposes some interesting solutions to federal student loan defaults, such as automatically enrolling delinquent borrowers in an income-based repayment plan. This approach has some bipartisan support, although of course I would have concerns about implementation, given the track record of federal student loan servicers.
Obviously, the rest of the above proposals are deeply concerning. But don’t panic. Here are some caveats:
- This proposal is largely just a re-hashing of what the administration proposed last year, at least when it comes to student loans. It’s not the exact same blueprint, but the elimination of PSLF and replacement of IDR plans was already proposed.
- In this budget blueprint, current borrowers in repayment, and borrowers completing an existing educational program, would effectively be grandfathered in to the current programs, since the changes would be implemented only for people who take out new federal student loans starting in 2019. This was also the case for the last Trump budget blueprint, and is the case for the PROSPER Act as well, which is proposed congressional legislation that would also eliminate PSLF and IDR plans.
- The White House doesn’t pass a budget – Congress does. And this budget proposal has little chance of being enacted into law. Think of it as a White House wish list.
If you follow my blog, you know that these student loan programs continue to be under attack. But this isn’t the time to panic, it’s the time to be vigilant. If you are concerned about preserving PSLF and IDR plans, here’s what to do.