If you’re one of the hundreds of thousands of people banking on your job in the public or nonprofit sectors to pay off your student loans, listen up.
The Trump administration is set to release its first detailed budget May 23 — and it could hit you hard.
Among its proposed budget cuts? The Public Service Loan Forgiveness Program, according to budget documents obtained by The Washington Post.
This means public school teachers, firefighters, health workers and others are facing a huge amount of uncertainty about their student debt.
What You Need to Know About the Public Service Loan Forgiveness Program
The Bush administration established the Public Service Loan Forgiveness Program in 2007. It aimed to encourage college grads to seek jobs in public service or the nonprofit sector by forgiving their student loan debt after 10 years of service.
The Washington Post reports that at least 552,931 people are on track to receive loan forgiveness, with the first loans scheduled to be forgiven this October. It’s not clear how borrowers currently enrolled would be affected.
The program has been criticized for allowing borrowers to rack up hundreds of thousands in student loan debt to obtain graduate or doctoral degrees, though supporters argue that many public service jobs require advanced degrees.
In its 2015 budget proposal, the Obama administration suggested a $57,500 cap on the amount the program can forgive. (That cap was dropped from the budget, and no cap is currently in place.)
In March, the U.S. Department of Education said the student loan forgiveness letters the program handed were “not binding and can be rescinded at any time.”
People participating in the program have said they based many major life choices on the program. Some told NPR last month they passed up higher pay in the private sector to take advantage of the loan forgiveness program. Others said that cutting the program could cause them to delay their retirement and marriage plans, and even make them reconsider having children.
A White House official told The Washington Post that it’s too early to comment on the specifics of the budget, but had this to say:
“The president and his Cabinet are working collaboratively to create a leaner, more efficient government that does more with less of taxpayers’ hard-earned dollars,” the official said.
Other Ways the Budget Would Impact Your Financial Aid
The elimination of public service loan forgiveness is part of a proposed $10.6 billion cut to federal education programs, according to the preliminary documents The Washington Post obtained.
The Trump administration says it’s focused on creating a leaner budget that focuses on school choice.
If you weren’t thinking about taking advantage of the Public Service Loan Forgiveness Program, what’s proposed in the budget could still affect you or your children.
Other proposed changes that might impact your financial aid and/or student loan debt that you might want to take note of:
- The cuts would slash work-study programs in half. That means if you’re working your way through school, you might have a harder time finding an on-campus work-study job in the coming years.
- If you’re a low-income student who qualifies for Perkins loans, your financial aid award could be reduced because the budget would eliminate $700 million for Perkins loans. Pell Grant funding for students with financial need would remain in place.
- The Washington Post reports the spending proposal would “take a first step toward ending subsidized loans.” The government pays the interest on subsidized loans while you’re still in school, meaning you could pay more in the long run if subsidized loans are cut.
If you’re one of the hundreds of thousands of borrowers facing uncertainty about your student loans, don’t panic yet. The president’s proposed budget typically goes through significant changes under Congressional scrutiny.
Of course no matter what happens, always talk to your student loan servicer about your repayment options.
Kelly Smith is a junior writer and engagement specialist at The Penny Hoarder. Catch her on Twitter at @keywordkelly.
This was originally published on The Penny Hoarder, one of the largest personal finance websites. We help millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. In 2016, Inc. 500 ranked The Penny Hoarder as the No. 1 fastest-growing private media company in the U.S.
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