Education secretary Betsy DeVos repeated President Trump’s request to end this popular student loan forgiveness program.
Here’s what you need to know.
Forgiveness for student loan
DeVos was on Capitol Hill this week to discuss, among other topics, the president’s annual education budget. Trump’s new annual budget requires several changes to student loans, which are part of a $ 5.6 billion cut in funding from the United States Department of Education. As in previous years, Trump repeated his call to end the forgiveness of the public service loan.
The Public Service Loan Forgiveness Program is a federal program created in 2007 by President George W. Bush that forgives federal student loans for borrowers who work full time (more than 30 hours per week) in a federal, state public service. o eligible local job o 501 (c) (3) nonprofit job making 120 eligible payments in ten years. The program is intended for public officials such as members of the United States military, police officers, firefighters, first responders, prosecutors, public defenders and other public officials.
Why end the forgiveness of the public service student loan?
“The administration believes there is no need to incentivize one type of job and one type of job over another,” DeVos said this week during a hearing in the United States Senate. “And we have a demand in our over 7 million jobs that are not currently employed, and philosophically favoring one type of research over another type of research doesn’t align with our position.” In addition, DeVos said it wanted to balance the needs of both student loan borrowers and federal taxpayers. By eliminating this student loan forgiveness program, DeVos argues, it would save money on the federal government from not having to potentially forgive billions of dollars in federal student loans.
Bernie Sanders: cancels all student loans
The proposal to end this student loan forgiveness program differs drastically from several presidential candidates, including Senator Bernie Sanders (I-VT). Sanders wants to forgive all of the $ 1.6 trillion of outstanding student loans, including federal and private student loan payables. Sanders’ student loan forgiveness plan has no eligibility requirements; all 45 million student loan borrowers are eligible for student loan. Sanders says forgiving the student loan will make the economy grow by $ 1 trillion over the next 10 years and create up to 1.5 million new jobs every year. (Moody believes that the economic impact would be more contained). Former Vice President Joe Biden does not support the cancellation of all $ 1.6 trillion student loan debt and the charging of federal taxpayers. Biden detailed his student loan plan and why he believes his plan is better than the Sanders plan.
Silver lining: what Trump and DeVos offer
Importantly, Trump does not propose to eliminate all student loan forgiveness. Rather, it proposes to end the public service loan forgiveness program. Importantly, the proposal would have an impact on future borrowers who borrow federal student loans as of July 1, 2021. The budget proposal does not provide for existing borrowers who are already working in the public service and are currently paying student loans.
Here is what Trump proposes instead:
- Simplify the repayment of the student loan: Reduce the number of student loan repayment plans to simplify the student loan repayment and help borrowers repay student loans more quickly. Federal student loan repayment plans can help you reduce your monthly payment (even if interest accrues on your balance), but don’t expect to get a lower interest rate on student loans.
- Change in student loan forgiveness: Through an income-based repayment plan, federal student loans for college borrowers would be forgiven after 15 years of student loan payments. Currently, federal student loan forgiveness can be received after 20 years (bachelor’s degree) or 25 years (graduate school) under existing income-based repayment plans. Borrowers are likely to still have to pay income taxes for the forgiven amount.
Your next steps
It is important to remember this: Congress decides federal spending and then decides whether to finance or repay a federal program such as forgiving public service loans. In the meantime, act on the student loan repayment. Get started with these four options, all at no cost: