Trump to propose scrapping beleaguered student loan forgiveness program

A student loan forgiveness program for teachers, social workers and other public servants could be in jeopardy.

Advertisement

The Trump administration will propose ending the Public Service Loan Forgiveness program (PSLF), according to preliminary Education Department budget documents obtained by The Washington Post. The program, which allows borrowers working in public service to have their federal student loans forgiven after 10 years of payments, has been a subject of concern for borrowers and advocates over the past several months amid signals that borrowers may not get the forgiveness they’ve been counting on.

Some important caveats: The budget documents obtained by the Post aren’t final and, even if the Trump administration proposes ending PSLF, it would take an act of Congress to actually get rid of it. Still, the report marks the biggest sign yet that the worst fears of borrowers relying on the program could come to fruition.

Alexis Goldstein, a senior policy analyst at Americans for Financial Reform, a coalition of civil rights, consumer, labor and other groups, described the idea of eliminating the program as “horrifying,” noting that a slew of data indicates that borrowers are struggling to manage their student debt, pushing them to put off home-buying and other financial milestones. Eliminating a forgiveness program would only make that worse, she said. “It seems both ill-conceived from a policy perspective and just cruel.”

The program, which was signed into law by George W. Bush in 2007, faces a major test later this year as the first cohort of borrowers will be eligible to claim forgiveness. Borrower advocates have been warning for years that a combination of a lack of publicity, very stringent eligibility requirements and confusion about the program could mean that many borrowers may find themselves disappointed when they try to access the forgiveness they’ve been counting on.

An estimated 4 million workers are eligible for the program, according to the Government Accountability Office, but just roughly 500,000 have submitted the necessary documentation to ensure they’re on track toward forgiveness, known as an Employment Certification Form (ECF). Most advocates have assumed that even if the program were to be taken away, borrowers who filled out the ECF forms would be grandfathered in. It’s unclear whether that would be the case if the Trump administration’s reported proposal became reality. The Department of Education didn’t immediately respond to a request for comment.

What’s more, a lawsuit winding its way through the court system has borrower advocates concerned about the validity of the ECF forms. In the case, the American Bar Association is accusing the government of reneging on certain borrowers who had their ECF forms approved. The Department defended its actions as part of the suit. The borrowers who are part of the case worked for organizations whose status as part of the program wasn’t enshrined in statute — only 501(c)3 nonprofits and all levels of government are guaranteed forgiveness in the statute — though it’s hard to argue that the work they do, defending veterans and immigrants, for example, isn’t public service.

Borrowers often plan their financial lives and careers around the existence of the program, which allows them to work in fields that may require a lot of education, but don’t necessarily pay well, with fewer financial worries. “Our fears are feeling very justified right now with this budget,” said Natalia Abrams, the executive director of Student Debt Crisis, a student debt advocacy organization. “I’m just thinking of the person who went to get a graduate degree at an expensive school like Harvard to go into a public service,” she said. “They’re just screwed.”

Critics of PSLF say it’s largely used by savvy graduate students, who can borrow up to the cost of their degree in federal loans. The Obama administration even recommended putting a cap on the forgiveness offered through PSLF at $57,500 — the limit undergraduate students can take out in federal loans — as a way to better target the benefit.

Betsy DeVos, the Seceretary of Education, has indicated previously that she could be open to changes to the program. In written answers to questions posed by senators as part of her confirmation hearing, DeVos didn’t commit to defending the program. According to the Post, the elimination of PSLF would be part of a broader effort to cut costs at the Department and officials would steer some of the savings into school choice programs, initiatives that allow students to use government money at non-public schools, of which Devos has been a long time supporter.

Still, Goldstein said she’s confident that Congress wouldn’t go along with any proposals to completely eliminate the program. In the mean time, both she and Abrams recommended borrowers who believe they’re eligible continue as normal and submit the necessary documentation in case there are any changes to PSLF. They also urged borrowers to get involved. “If this seems like a program to you that is worth keeping, the more we can talk about it, the more likely it is that we can ensure it’s not eliminated,” Goldstein said.