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Worries arise over student loan forgiveness program
20 May 2017, 03:23 | Kelvin Horton
The cost of paying back a student loan will soon be more expensive for new borrowers
But thus far, student loan borrowers have only seen reductions in protections and are facing the loss of certain forgiveness programs that they were relying on. Many teachers, public defenders, Peace Corps workers, and law enforcement officers fit the qualifications. The first "wave" of people who would qualify for loan forgiveness will hit their 10-year mark in October.
"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.
The program has been shrouded in some uncertainty for months.
Data in the report is based on responses from loan servicers who assist borrowers in rehabilitating their loans from default and enrollment in income-driven repayment plans. "Increasing access to and success in postsecondary education, especially for the most vulnerable members of society, remains a very important goal in the post-recession economy, and the budget should reflect this priority". A public version of the department's budget is expected to be released next week.
But borrower advocates are concerned the new system proposed by DeVos's Department of Education puts borrowers at risk and rolls back progress in achieving consumer protections.
A request for comment from the Education Department was not immediately returned. "It would be the equivalent of pulling the rug out from under us", said Daniel J. Crooks III, a government attorney who is expecting loan forgiveness from the public service program in six years. Student loans, however, are not free money and frequently, the college years go by much quicker than students anticipate.
One woman, Angie, wrote on Facebook, "Do like ordinary people, get a job and pay your debts".
"Too many Americans are facing crushing student loan debt that feels like a millstone around their necks", Merkley said.
Now, according to a rough draft of the budget, President Donald Trump is planning to deprive federal education initiatives of $10.6 billion - and the first program to go up on the chopping block is PSLF.
For instance, the public service loan forgiveness program is set in statute and can not be eliminated unless Congress votes to do so. In court documents, attorneys for the Department of Education suggested that borrowers may not be able to rely on prior notices from their loan servicers about whether they qualify.
"The changes will certainly increase profits for the industry, but will do nothing to tame the high levels of default in the program", said Rohit Chopra, senior fellow at the Consumer Federation of America and former CFPB assistant director.
Additionally, the CFPB estimated that about 80 percent of borrowers who failed to make any payments after "curing" default would have been eligible for a $0 monthly payment on an IDR plan.
Students with federal education loan can enroll in income-driven repayment plans that tie their monthly payments to a percentage of their earnings, so students with little money or those who fall on hard times can manage their payments. Signing up for that repayment plan alone requires submitting information about your income each year - a process which can take weeks and temporarily stop the clock on your 10 years of payments. 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.
The Trump administration's proposal does retain one major element of the Obama-era initiative - the eventual launch of a single portal borrowers can use to repay their debts.
The median borrower in the program has more than $60,000 in student debt and nearly 30 percent of them have more than $100,000 in debt, according to a Brookings report.
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