President Donald Trump Loan Forgiveness
Since the inauguration, one question is on a lot of borrowers minds, what is Trump Loan Forgiveness? Since President Trump is walking into an administration with $1.3 trillion in federal student loans, there is no question this is an issue that needs to be addressed sooner than later.
During the Tuesday confirmation hearing for education secretary choice Betsy DeVos, senators barely touched this issue. The one thing they should have zeroed in on if any is the Public Service Loan Forgiveness program that is set to go off this October.
PSLF is a very costly “loan relief” plan that gives special treatment to those that work in the public service or nonprofit sector. Once the program is activated it could cost taxpayers a staggering $84 billion, or more.
All government and nonprofit jobs, plus jobs in health care, are considered “public service.” Altogether, these public-service jobs account for about one-quarter of the U.S. workforce according to a recent Government Accounting Office report.
Currently, there are five “income-based repayment” programs in place and PSLF works in combination with whichever of the five programs the borrower qualifies and enrolls in.
The Obama administration introduced that later of the programs known as Revised Pay As You Earn or REPAYS. This reduces loan payments to only 10 percent of the debtor’s discretionary income and provides loan forgiveness after 20 years.
It remains to be seen what Trump Loan Forgiveness will mean for new and existing borrowers. The president has mentioned his proposed plans but as of now, nothing has been solidified and we don’t know what he plans to do for PSLF.
The borrowers who have been accepted and are enrolled in PSLF are eligible for loan forgiveness after making only 120 monthly consecutive loan payments. Those who signed up back in 2007 are nearing the end of their program and are set to have their remaining debt forgiven this October. Nearly 450,000 have already enrolled in PSLF on a provisional basis, under a voluntary pre-certification plan. Given the broad definition of “public service,” it looks as though 1.4 million borrowers currently in income-based programs might qualify.
If all of these borrowers enroll in the program and have roughly $60,000 in unpaid principal and interest, debt forgiveness amounts to a shocking $84 billion. This could be a very conservative number as $60,000 is only the median loan balance of current PSLF applicants. This doesn’t show that thirty percent of these have loan balances exceeding $100,000 and currently there is no cap on the amount that can be forgiven.
The issue with this program, and why it may not be included in Trump Loan Forgiveness, is because it steers our most highly educated workers away from the real economy and into big government which doesn’t stimulate economic growth.
A happy medium will need to be found with the new administration as these programs are extremely helpful for those that need assistance with paying their loans back.
For more information and to see if you qualify for any of the loan forgiveness programs, give us a call at (800) 940.8911.