400000 promised student loan forgiveness - here's why they are panicking

19 Mai, 2017, 17:49 | Author: Marc Bacque
  • President-elect Donald Trump has picked Betsy DeVos a top Republican donor and school choice activist to head the Department of Education the Trump transition team announced Wednesday

No, this isn't a joke.

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.

Under Trump's spending plan, the government could eventually make more money off of student loans through the elimination of Public Service Loan Forgiveness, changing income-driven repayment plan for graduate students and doing away with subsidized lending. 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. Education Secretary Betsy DeVos pledged earlier this year to "do a better job" than the Obama administration at managing the department's loan contractors.

What will that mean for borrowers?

"If you have income-based repayment, you don't need Public Service Loan Forgiveness", said Jason Delisle, a resident fellow at the American Enterprise Institute, a conservative think tank. "This legislation well help address the student loan debt crisis by providing relief to Wisconsin students and families". If there are a couple more rate increases over the next several years, a student who graduates with $31,100 in loans at a blended rate of 5.1 percent would pay $49,672 to repay them over 20 years - $5,380 more than the $44,292 in total repayment costs they would be looking at if they'd been able to take all of their loans out at 3.76 percent, said Stephen Dash, chief executive of Credible, a marketplace for student loans.

Now, a disclosure: As Henry Blodget would say, I am conflicted out the wazoo on this topic. Take the government's rehabilitation program, which targets people who have defaulted on their debt-meaning they missed nine months of payments. I absolutely have a personal financial stake in the outcome of this policy debate, which is why I haven't weighed in on it previously. In fact, Devos' pet causes of school vouchers and charter schools will receive more funding. New government figures suggest much of that money may have been wasted. But the Government Accountability Office has estimated that as many as a quarter of USA workers could qualify based on the definition of eligible jobs.

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The bureau has called for loan servicers to make the transition from default to an income-based repayment plan easier for borrowers. "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.

Beyond all that, there are also more modest loan forgiveness programs specifically for teachers and health care professionals who work in high-need areas, including social workers. 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.

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.

With all of that said, this still reads like a sick joke. But for students pursuing advanced degrees, the proposed budget makes life considerably more hard.

Of course, the Trump Administration isn't cutting everything. The typical work-study student earns about $1,600 a year.

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