“The 2015 Budget proposes to: expand PAYE to all qualified student borrowers regardless of when they took out loans: eliminate the current standard payment cap in PAYE; calculate payments for married borrowers filing separately on the combined household Adjusted Gross Income; cap Public Sector Loan Forgiveness (PSLF) at $57,500 (the independent undergraduate student Direct Loan limit); establish a 25-year forgiveness period for borrowers with a debt above $57,500; prevent payments made under non-income-driven repayment plans from counting toward PSLF terms; and cap the amount of interest that can accrue at 50 percent when a borrower’s monthly payment is insufficient to cover the interest”

The above was copied directly from the text of the President’s 2015 budget proposal. It all looks great except for the part that caps PSLF at $57,500. I would assume though that this cap would only apply to “new borrowers” as of some future date

Thoughts, Heather?

And now that I think about it, this new “cap” could very much be a disaster for many borrowers who do not earn high incomes but have a high debt. The spirit of a cap is to prevent a medical student from racking up $300,000 in debt and having much of that forgiven at a non-profit as a well-paid physician. Take someone who returned to graduate school to earn a master’s degree in education, and they had to take on more debt to do this. Maybe they were only willing to take on this debt BECAUSE the government announced that PSLF would forgive all remaining debt after 120 payments. It would be grossly unjust for too many people is this cap applies to people who have completed their education or are currently enrolled.

I came here to ask this same question. I am 3 years into PSLF payments and just read the budget proposal. It specifically mentions in a couple places provisions that would apply only to new borrowers, but it is really unclear to me if the PSLF cap would be for new borrowers only. I’m quite concerned about this and would love to hear your thoughts. On the other hand, opening up PAYE to all borrowers would be fantastic!

I agree that the proposed PSLF cap would have a huge negative impact on student loan borrowers with high debt burdens.  “New borrowers” is defined several different ways in different contexts.  I expect and believe that current borrowers would not lose access to the programs as they currently exist, but I can’t make any guarantees.  My thoughts are that the budget is a proposal, that we should recognize that this proposal is just the first step towards establishing a budget, and we must be vigilant about having our voices heard during the budgetary process.  More from me on all this soon.

Hi Heather, Accepting what you said above, I am wondering if you think “new borrowers” would apply to people currently in school who haven’t enrolled in Public Interest Loan Forgiveness yet, but have been operating under the belief that they could? I imagine many people would have done things differently if this program didn’t exist.  Thank you!

Tov Pent - 07 March 2014 04:02 PM

Hi Heather,Accepting what you said above, I am wondering if you think “new borrowers” would apply to people currently in school who haven’t enrolled in PSLF yet, but have been operating under the belief that they could and are planning to (aka,me).  Thank you!

Heather is much more qualified to answer this question. But, I will say that PSLF is not something that you enroll in. It is just something that you apply for upon making enough qualifying payments. Essentially, you could make enough qualifying payments and never submit the request for PSLF. You would then continue to be required to make payments until you did!

I am in your situation as well. I am currently in a program and part of my decision to enroll in the particular program at the particular school is based on PSLF as it stands now. From what I have seen in the past, changes that involve student loans usually apply to brand new borrowers after a certain date.

Here is a link to the petition that has been created to stop this cap from being implemented!

https://petitions.whitehouse.gov/petition/retain-public-interest-loan-forgiveness-program-its-current-form-forgiving-all-qualifying-student/wkqnqBCH

I’ve posted some more detail about why this is not the time to panic on the blog.  Check there and the comments below for specifics.

Michael,

Thanks a lot for your comments and your leadership on this issue. 

I’m very concerned that current high school students will not have access to the forgiveness provisions as they currently exist.

I’m quite confident that people who are completely done borrowing and are currently making payments will have access to the forgiveness provisions as they currently exist.  [but I’m not in charge, no guarantees, blah blah blah]

I’m quite confident that folks who are enrolled in school, are borrowing now, and continuing to borrow will have access to the forgiveness provisions as they currently exist.  I do have some concern that current students could face two sets of rules: the existing rules for the loans they had upon the effective date, and some new less good rules for the loans they get after.  That’s a scary possibility, but I think it’s more likely that as long as people have taken out a federal loan before the effective date of any future legislation, they would be able to access forgiveness as it currently exists for the loans they need to finish whichever degree program they are in on the effective date, or maybe even for any loans they ever get. 

We need to be involved in this debate.  I doubt much will happen to student loans as an immediate response to the budget proposal (a FY 2015 budget is already in place!), but at some point congress will take up Higher Education Act Reauthorization.  That’s when things get rolling.  My best guess?  It’s going to be a while before any new student loan laws are passed, I’d be surprised to see a done deal in this calendar year.  Then there is the regulation process.  That involves negotiated rule making.  Public hearings.  Comment periods.  I’m betting another full year plus on that.

Sorry this is so stressful.  I swear I’ll do all I can and will be calling upon y’all to speak up too.

Heather, it is indeed stressful!  I’m an ADA and my facebook newsfeed has been blowing up on this topic.  As always, it was nice to come to your page for some good, real, information.  I, and everyone else who follows you, truly appreciate you keeping us abreast of any new information regarding this topic.  When the time comes, please let us know where we need to be heard.  If you think we all should be writing the President and/or our representatives in Congress, please let us know.  As always, thank you for everything.

Howdy.  I haven’t been to this site much, and this is my first post on the forums.  But I’ve been working for gov’t for 2.5 years (I graduated with a JD/MBA from a private school in 2011), so I have a lot invested in PSLF’s future.

I research the 2015 budget proposals on DOE’s website. 
Here’s the table of contents: http://www2.ed.gov/about/overview/budget/budget15/justifications/index.html
Here’s the specific doc: http://www2.ed.gov/about/overview/budget/budget15/justifications/s-loansoverview.pdf

On the Student Loans Overview, page S-13, I found two passages that give me hope:

“In addition, to simplify borrowers’ experience while reducing program complexity, PAYE would become the only income-driven repayment plan for borrowers who originate their first loan on or after July 1, 2015, which would allow for easier selection of a repayment plan. Students who borrowed their first loans prior to July 1, 2015, would continue to be able to select among the existing repayment plans (for plans for which they now qualify and for loans originated through their current course of study), in addition to the modified PAYE.” (emphasis added)

“The Budget proposes additional changes to PAYE to include: . . . Capping Public Sector Loan Forgiveness (PSLF) . . .” (emphasis added)

To me, that sounds like existing student debtors will be grandfathered in with uncapped PSLF as long as they remain in IBR or ICR. 

Does anyone agree/disagree with that interpretation?

UPDATE: The department of education seems to suggest that under the president’s budget proposal, the PSLF cap would only apply to new borrowers.

http://educatedrisk.org/analysis/of…ed-budget-pslf-caps-paye-benefits-limitations

While the language in the response is a bit vague, the ed department seems to say the PSLF “cap” would only apply if existing borrowers switch from their current IBR plan to the new, extended PAYE plan. The author of this article plans to clarify the statement from the department of education, including the reference to “with minor exceptions.”

1) Will the Proposed PSLF cap ($57,500) only apply to New Borrowers after July 1, 2015 (and those who opt into the new program)? Or to all borrowers? Or all borrowers that use PAYE as a repayment plan (see question #2 for clarification)?
This has been an issue of great concern for current borrowers and official clarification would be helpful. See [AskHeatherJarvis] [Boston Student Loan Lawyer Adam Minsky] and Comments in [New America Foundation]. Also, PSLF is a separate statute from PAYE, so how would ED/Congress change PSLF to only effect future PAYE borrowers? Would it create a new time period for PSLF or create new language in the PAYE program for a new PSLF program? If the PSLF statute (20 USC 1087e(m)) is changed to include the cap (without clarification), then it would appear to apply to all borrowers. Any guidance on this would help.

ED’s Answer: For all new borrowers (with minor exceptions) starting with the 2015-2016 academic year the new expanded PAYE program will be the only income-based repayment plan available so the cap applies. For any other existing borrowers they retain the income-based repayment plan in their promissory note but if they choose to switch to the new expanded PAYE program, they have to accept all the conditions including the caps.

Good post, Rob. I just came across the same article. My concern, and this is only based on the assumption that “ED’s” answer is true, is that current or prior borrowers with high debt levels, and who are currently in a public service role or plan to be in the future, would essentially be locked out of taking advantage of the PAYE program that would be available for everyone, because in order to do so, they would have to accept a cap on PSLF. Basically, everyone EXCEPT public service workers with high debt levels would benefit.

Again, this is all just a proposal, and the petition for leaving PSLF uncapped is doing quite well. My opinion is that until the absurdly high costs of college are somehow brought back down to a realistic level (and who knows when that will be), capping PSLF is just not right. And, if a cap is ultimately put in place in the near future, that it should apply ONLY to new borrowers as of 2015, and that is should not be based on what repayment plan the a borrower elects. Many borrowers would likely enroll or be enrolled in the expanded PAYE without realizing that they have accepted a cap on what amount will be forgiven.

https://petitions.whitehouse.gov/petition/retain-public-interest-loan-forgiveness-program-its-current-form-forgiving-all-qualifying-student/wkqnqBCH

It seems some of the concern (read: hysteria and panic) about whether the PSLF cap will apply to existing borrowers stems out of ambiguity regarding whether PSLF is a repayment “plan” or merely a “program.”

As others have pointed out, the 2015 proposed budget states: “Students who borrowed their first loans prior to July 1, 2015, would continue to be able to select among the existing repayment plans.”

I, and several others whose comments and blogs I’ve read, have found this statement ambiguous (and terrifying) because we all know that IBR, ICR, etc., are “plans” but it is less clear that PSLF is a “plan.” So, I went to the statute, and this is what it says:

20 U.S.C.A. § 1087e (m)
“Repayment plan for public service employees
(1) In general—
The Secretary shall cancel the balance of interest and principal due, in accordance with paragraph (2), on any eligible Federal Direct Loan not in default for a borrower who—
...”

So the statute itself refers to PSLF as a plan, which leads me to conclude that any language saying existing borrowers have access to current plans will also have access to PSLF in its current state. On the other hand, I am not sure that relying on a heading is sound statutory interpretation…

Thoughts???

The Education Department has responded and says under this proposal, the PSLF cap would not apply to current borrowers provided they do not change to the new repayment plan options.

http://educatedrisk.org/analysis/ed…oposals-combined-incomes-pslf-caps-paye-terms

3) Will existing borrowers on legacy (pre-7/1/2015) IBR, ICR, and PAYE payment plans who choose to stay on those plans and NOT convert to the new (post-7/1/2015) PAYE plan face the $57,500 cap on PSLF?
There was still a lot of confusion about whether the proposed Public Service Loan Forgiveness cap would apply to current borrowers, even with ED’s previous statements. A reader suggested rephrasing the question to make ED’s response clearer (see above).

According to a U.S. Department of Education spokesperson, current borrowers will not be subject to the proposed $57,500 cap on Public Service Loan Forgiveness. This cap will only apply to new borrowers after July 1, 2015 (if legislation mirrors the proposal). Current borrowers will only be subject to the $57,500 cap if they affirmatively opt into the new PAYE program. Borrowers repaying or applying for PAYE right now will not be subject to the cap.

Based on this explanation, it would appear that a current borrower would be able to apply for PAYE with current terms after July 1, 2015 so long as the loans were disbursed prior to July 1, 2015. Thus, current borrowers would be grandfathered-in for the life of their repayment. For a borrower that has some loans prior to July 1, 2015 and some loans after that date, then it could become confusing because some of the loans would subject to the cap while others would not.

Hallelujah, a sign of hope. Thanks for the update!

what happened with this proposal?