Public Service Loan Forgiveness is Secure(ish)
The folks in Washington, DC are looking to save money wherever they can. I've been hearing from a lot of worried borrowers wondering, "Can I count on Public Service Loan Forgiveness to last?" My answer? Um, maybe. Probably. I think so.
Public Service Loan Forgiveness doesn't exactly cost money
Because only Federal Direct Loans are eligible for Public Service Loan Forgiveness, the United States Department of Treasury never writes a check to anyone. Instead, when a borrower qualifies, the federal government writes off debt owed.
Public Service Loan Forgiveness is not subject to appropriations or the budgetary process
Unlike many government programs, Public Service Loan Forgiveness doesn't need anybody to decide to spend money on it in order for it to function. PSLF isn't subject to appropriations or the budgetary process, so I don't need to go to Capitol Hill begging for money every year. It cannot be "defunded" by the Department of Education. It would take an act of Congress to take away Public Service Loan Forgiveness and Income-Based Repayment from borrowers. Have you noticed lately how hard it is to get Congress to act?
The authorizing legislation is a cash cow
The College Cost Reduction and Access Act (that established Public Service Loan Forgiveness and Income-Based Repayment), created savings to the federal government of an estimated $43.6 billion by cutting subsidies previously paid to lenders (the formulas used to calculate lender yields on student loans were changed, lender exceptional performer status was eliminated, the level of insurance provided to lenders was reduced, the lender origination fee on loans was increased, guaranty agency retention amounts were reduced, and guaranty agency account maintenance fees, which are paid to guarantors annually by the federal government were reduced).
Additionally, Public Service Loan Forgiveness brings loan revenue into the Federal Direct lending program (because many borrowers will need to consolidate into Federal Direct to qualify for Public Service Loan Forgiveness).
But no one died and made Heather King of anything
I'm well aware that there are no guarantees in life. When student loan borrowers start earning loan forgiveness (starting in 2017 and kicking up in 2019), Congress may well take a look at the program's costs and benefits. If Congress wants, Congress can change the law and Public Service Loan Forgiveness. I worry about that, but for the reasons here, I don't worry about it a whole lot .
And, I'd be shocked and amazed if benefits were taken away from borrowers already on the path towards forgiveness. My analysis is that borrowers who have consolidated loans into Federal Direct, chosen a qualifying repayment plan, and completed a number of payments towards forgiveness would be permitted to complete the forgiveness process.
But am I in charge of student loan policy? That's a big negative, Ghost Rider.
