May, 2017: After months of a tight-lipped policy related to student loan program changes, the Trump administration recently confirmed concerns about the availability of federal loan forgiveness when it released its 2018 budget proposal. The proposal suggests both eliminating the PSLF program, as well as the consolidation of available income-driven plans down to a single option requiring payments of 12.5% of discretionary income and loan forgiveness after 30 years for graduate-level professionals.
Regarding these proposed changes, current students and graduates should be reassured by a few things. For one, the master promissory notes you signed to borrow federal loans for school included language about PSLF and your right to utilize the program. Thus, a contract between you and the federal government suggests that you borrowed under the assumption you’d be able to take advantage of it under the terms that existed at the time you received the loans.
Secondly, if you’re actively working towards maximizing PSLF and have made economic decisions based on the program’s details, you’ve demonstrated a reliance on the program. You’ve allowed interest to accrue against you in pursuit of forgiveness, and may very well have made critical career decisions in this effort as well. There is a historical precedent of the federal government grandfathering such individuals should future changes be implemented. As unforgiving as many perceive Trump’s FY2018 budget proposal to be with respect to PSLF (and, um, in general), grandfathering current borrowers is expressly mentioned for both PSLF and the current IDR plans, a positive sign.
Additionally, the impact of the proposed changes to the PSLF program by the Trump administration could have a potentially negative impact on the future supply of health care professionals (this case could certainly be made, anyway). Many students and graduates today see PSLF as a means to making their career serving others possible, especially in light of the lack of growth in primary care physician and other graduate health professional wages.
DWOQ has long encouraged borrowers to accrue savings along the way as they position to maximize loan forgiveness in an uncertain environment. While we certainly hope that current borrowers will not be impacted by these proposals, future graduates may likely be. It is important to stay apprised of any changes and should they compromise your savings opportunity, adjust your repayment strategy accordingly. DWOQ is following the marketplace closely, and will continue to provide updates as it evolves.
Remember, WE are students of the student loan marketplace so that YOU don’t have to be.
‘til DEBT do us part,Jason DiLorenzo
Doctors Without Quarters, LLC
Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.