Confirming the fears of many, President Donald Trump’s recently proposed federal budget calls for the defunding of the Public Service Loan Forgiveness program. While those currently enrolled in the program would not be affected, anyone taking out loans after July 1, 2018, would not be eligible.
Proponents of the program, designed to attract candidates to the public sector by forgiving student loans after 120 consecutive payments, fear this cut would incentivize teachers, lawyers, nurses, and other professionals to seek out careers in the private sector where the salaries are significantly higher. Opponents say the program is too costly, and the proposed cuts would save taxpayers billions.
What Does This Mean?
Adam Minsky, a Boston, Mass.-based attorney who specializes in student loans and consumer issues, cautioned that President Trump’s budget proposal is just that — a proposal.
The president can propose a budget, but it’s up to Congress to finalize and ratify it. The Republicans currently have a majority in both the House of Representatives and the Senate, and the federal budget only needs to have a simple majority for it to pass. Still, that would require about eight Democrats to vote yay, something they’re unlikely to do unless the final draft takes a more bipartisan turn.
The process of getting a budget approved through Congress is a long road. Each chamber of Congress has to approve the bill internally, then the bill goes to a committee that looks at both the Senate and House of Representatives bills to reconcile any differences. Finally, the bill is sent to both houses of Congress for a final vote.
Budget proposals rarely make it through Congress unaltered. Trump’s proposal is more like a polite nudge from the executive branch, not a firm decree.
Budget talks will continue throughout the summer and fall, and it’s not clear when a final proposal will be announced.
What Is the Public Service Loan Forgiveness Program?
Started in 2007, the Public Service Loan Forgiveness program allows borrowers who took out federal student loans to have their loans forgiven after 120 consecutive payments (10 years), as long as they served in a government or nonprofit role while all those payments were made. Graduates who utilize the program are on a mandated income-based repayment plan, so their payments are often much lower than they would be on the standard plan.
Careers such as law, nursing, social work, teaching, law enforcement, firefighting, and the military would all be affected by this shift. Many who choose to enter these professions have the option of working for the private sector where salaries are higher, but choose the public route because of this program. Not having the PSLF program could mean a dearth of candidates entering these fields.
“You have people making major life decisions based on the existence of this and other programs,” Minsky said.
The program incentivizes people to work in the public sector where salaries are lower and the demand is greater. If people don’t have a reason to take a lower-paying job, some experts worry that the gap between the rural and urban communities and other low-income areas will continue to increase.
Who Is Affected by This?
Only borrowers who take out federal student loans after July 1, 2018, would be affected by this change, and anyone who took out loans before this would be grandfathered in. The first crop of students who will have their loans forgiven will be this fall. Currently, over half a million people are enrolled in the PSLF program.
What’s the Problem?
The problem with Trump’s proposal is that the Public Service Loan Forgiveness program is a federal law. A budget proposal can’t change the law, but it can defund the program. That’s where the legal confusion arises.
“That’s the million dollar question,” Minsky said. “How can you have a program that is legally allowed to exist without funding it?”
He anticipates that if a budget passes defunding the PSLF program, several lawsuits would immediately come about.
“The way they’re going about doing it is problematic from a legal point of view,” Minsky said.
What Can People Do?
If you oppose the president’s proposal, you should contact your local representatives to tell them how you feel. Each citizen has one House representative and two Senators. Minsky recommends calling, writing a letter, and setting up a meeting with their spokesperson.
When you call, “you want to identify yourself as a constituent and as a voter,” he said.
If you have coworkers who would also be affected by this, try to rally them to take action. Ask your boss if the organization you work for can take a public stand on these issues. Post about it on social media and encourage your friends to reach out to their elected officials. Strong public opinion could sway politicians to listen to the people and not include this proposal in their own budget.