This October will mark the first time that student loan borrowers who have worked for 10 years with the government or a qualifying non-profit will be eligible to have their debts wiped clean. It may also be the last time, as the Trump administration is reportedly targeting this and other Department of Education repayment programs for elimination.
The Washington Post, citing not-yet-released budget documents, reports that the possible plan would revamp federal student aid programs, including income-driven repayment and forgiveness plans.
According to the documents expected to be released next week, the budget would completely end the public service loan forgiveness program that wipes away federal student loan debt for some public servants.
For those unfamiliar, in 2007 the government began offering a public service loan-forgiveness program that will forgive certain federal student loans for borrowers who work for government organizations and non-profit groups for 10 years and make 120 on-time monthly payments on their loans.
The Post reports that there are currently an estimated 553,000 individuals enrolled in the program, which will forgive its first round of debt this fall. It’s unclear what would happen to the borrowers enrolled in the program if its budget is cut or eliminated.
We’ve reached out to the Department of Education, which manages the program, for comment. We’ll update this post when we hear back.
The Post reports that the forgiveness plan isn’t the only student loan program that could be in for a makeover.
Another aspect of the budget would revamp current income-driven repayment plans — meant to reduce the debt burden of borrowers.
The possible change would affect the time and amount borrowers in programs would pay. For instance, instead of a program where undergraduate borrowers can have their loans forgiven after paying 10% of their income for 20 years, they would have to pay 12.5% of their income for 15 years before forgiveness is granted.
The proposal would also revamp how much graduate students pay: Instead of 10% for their income for 25 years, they would pay 12.5% for 30 years, according to the Post.
Consumer advocates notes that while the leaked budget documents are troubling, many steps would have to be taken in order to actually eliminate some of these programs.
For instance, the public service loan forgiveness program is set in statute and cannot be eliminated unless Congress votes to do so.
Any final education budget will ultimately have to be approved by Congress, which, as we’ve learned in the past, could take up the whole thing or ignore it completely.
Just The Latest Controversy
Of course, the forgiveness program hasn’t been without its controversies. Back in March, the Dept. of Education revealed that some borrowers who believed their federal student loans were going to be forgiven through this program may still be on the hook for this debt, as the Department said the notices of eligibility sent to these consumers were not binding.
The revelation was made in a filing [PDF] by the Dept. of Education in response to a lawsuit that accused the agency of failing to keep its promise to forgive the education debts of public servants after 10 years.
Some borrowers claim that in recent years they have received notice from FedLoan, the company charged with determining if an individuals work qualifies for the program, that despite being previous qualified for the forgiveness program that they were no longer eligible to have their loans forgiven.
After receiving such letters, four previously qualified participants and the American Bar Association sued the Department of Education to find out why the changes were being made.