My question and big fear relates to whether this program will exist when I’m finally eligible to apply to get my remaining debt forgiven in mid 2021.

So what do you think?  How safe do you think it is to rely on the program still being around in 2021?  My fear is that once debts start to be forgiven in 2017, Congress will balk at the sticker shock, end the program, and leave me with a ton of debt I could have paid off sooner but for my reliance on the program.

Thank you for your advice!!

Unlike the many government programs, Public Service Loan Forgiveness is not subject to appropriations or the budgetary process.  Because only Federal Direct Loans are eligible for Public Service Loan Forgiveness, when a borrower qualifies, the federal government writes off debt owed; the United States Department of Treasury does not expend revenue.  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).

Also, the College Cost Reduction and Access Act created savings to the federal government of about $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, guaranty agency account maintenance fees, which are paid to guarantors annually),

It would take an act of Congress to take away Public Service Loan Forgiveness and Income-Based Repayment from borrowers.  That said, there are no guarantees in life and Congress can do what they want.  If a future Congress reconsidered Public Service Loan Forgiveness, my hope is that those borrowers who are already well along the path to Public Service Loan Forgiveness (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.

Ms. Jarvis:

I ran across this 2009 NYT article about state loan forgiveness programs being cut back or eliminated.  I don’t think this really bears on the PSLF because the key distinction is that the programs that were cut/eliminated were STATE programs that relied on the federal government as the funding source.  PSLF, on the other hand, is a federal program and my loans will be held by the feds.  So the state programs relied on an appropriations source whereas the PSLF does not.  Is my analysis correct?

Cheers,
AJF

Sorry…here’s the link to the article:  http://www.nytimes.com/2009/05/27/your-money/student-loans/27forgive.html?scp=3&sq=glater and kentucky&st=cse

AJF,

Yes, my analysis is the same as yours.  PSLF, unlike some of the programs inventoried in this article, does not require federal appropriations to states, or even federal appropriations to the Department of Education.  Only Federal Direct Loans are eligible for Public Service Loan Forgiveness, and the United States Department of the Treasury never has to write a check at all, instead it declines to collect on money owed. 

Check out this older NY Times article, in which Representative George Miller says, “These benefits are guaranteed, no matter what happens in our economy, and are kicking in at exactly the right time for millions of Americans,” said Representative George Miller, Democrat of California and chairman of the House education committee.

Yours,
Heather

I suppose another way to think of it is that the government pays up front.  When I consolidate my FFEL loans into Federal Direct loans, the government is paying the entire balance of my loans off TODAY by sending the money to Great Lakes and Access Group.  So the money’s out the door today but they take the write-off on paper in 10 years, which doesn’t cost them any more money out the door because the money already went out the door 10 years before the write-off.  I think that makes me more confident about this program being around.

And the thing is that the big risk was borrowing the money in the first place.

This is a great question and the same one I have had with the PSLF program. I support the PSLF program and would actually like to see Senator Warren or Sanders’ approach to student loans be taken up by Congress. But that’s a digression.

I am in both the IBR and PSLF program and have already paid about a little over a years worth of qualifying payments (I work for a local government). I have automatic withdrawl from my account for the IBR amount (which is about $250) every month. However, I pay about $250 more per month to cover the remaining interest because if the PSLF program is cancelled by an Act of Congress I don’t want to be back where I started from when I graduated with $90K of debt.

In the meantime, as I said I pay an extra $250 per month. Which is essentially wasted income if my loans are ultimately forgiven. My strategy is to wait until October 2017 when the first round of individuals start applying for forgiveness to see what happens. Of course I don’t know if that is even necessary.

Any additional comment Heather? Thanks! This thread was helpful!

to Kirker,

Wouldn’t it make more sense to take the $250 extra that you are paying each month and put it into a savings account? Keep it there, and if something happens to PSLF, you can put it all towards your loans. If PSLF happens, you’ll have a nice chunk of change after 10 years. I see no disadvantage to doing so, except your loan balance getting larger and larger (which might affect your credit applications, although many will use your IBR amount in determining your debt-income ratio). As long as you have a partial financial hardship, your interest accrued will never capitalize….and if it does, well, you can attack it quickly by transferring that money over (if you think PSLF is still risky.)

I really don’t believe anything will happen to the current PSLF plan for current borrowers. There would be huge outrage if PSLF is dismantled. Other forgiveness programs have existed and have been carried out (such as the Teacher loan forgiveness), and any changes to these programs have only affected new borrowers…

Hi hart47,

That’s not a bad idea. I’ll probably start doing that - at least through 2017 - when people in the PSLF since 2007 start registering for loan forgiveness.

I see in another post from Heather that the Obama administration is proposing capping forgiveness at $57,000 (I have $70K) and the Republican budget eliminates the program entirely. So looks like my caution is warranted.

Do PSLF program participants vest the law based on when they joined? Meaning if the forgiveness cap becomes $57,000, will I still be eligible for full forgiveness of my $70K?

I disagree that a conservative Democratic or Republican Congress and/or future president would really care much about public outcry. But we’ll see.

Thanks for the suggestion!

Cautious is good! I purposefully did not consolidate some loans because it would have driven up the interest rate on the whole consolidated loan. I figure they are small enough to pay off anyway, and if PSLF does not happen or I get a change of career, I’ll be glad they were seperate. I believe PSLF is closely tied to the repayment plan you are on, and that is what will determine if you are pslf eligible.. So if they cut the pslf program, the old repayment plans will not be available to new borrowers since they will be replaced with new repayment plans, but borrowers who are in the old repayment plan can remain in it. However if the borrower switches to a new repayment plan,, they must abide by all the caps that come with it, and will not be able to revert. Historically, afaik, repayment plan terms/forgiveness plans never change once a borrower agrees to them.

Just to be safe, I sent in my employment certification form after making one payment just to have my loans transferred to fed loan servicing and be in their computer system as having made a qualifying payment.

I believe that for Obama’s cap, the dept of Ed vaguely clarified that it would only affect new borrowers. As far as the republican budget, nothing was specific except a line in there saying that cuts “could” put an end to the program, but I really can’t see them cutting it for current borrowers. Student loans are a hot button issue, and if a public outcry affects their reelection chances, they’d care. I do hope the republicans remember that George Bush signed this thing into law….I actually hope it’s brought up in the presidential debates.