March 6, 2014

Will Proposed Cuts to Public Service Loan Forgiveness Impact Existing Borrowers?

Us student loan borrowers are understandably concerned about parts of President Obama's proposed budget, but we would do well to remember that the budget proposal itself cannot, does not, and never will determine whether any future cuts to student loan forgiveness would apply to existing borrowers. The offending document, the Budget of the United States Government, Fiscal Year 2015, is a political document. It consists of 212 pages of budget overviews organized by agency and summary tables of the dollar amounts in question. It is worrisome because it indicates that the administration is willing to support changes to existing student loan forgiveness programs that would make those programs less beneficial for high-debt student loan borrowers. The 2015 budget proposal is NOT a law. Washington, DC is the same today as it was yesterday, nothing is going to happen without lots of politial gyrations.

In any event, there are a number of reasons to feel confident that existing borrowers will be able to access Public Service Loan Forgiveness in its current form:

Discretionary programs require budget appropriations to operate and can be done in by lack of funding. Public Service Loan Forgiveness is not a discretionary program.

Public Service Loan Forgiveness is established by statutory law. It would take an act of Congress to change it.

Public Service Loan Forgiveness is incorporated into the Master Promissory Note that details the contractual terms of federal student loans.

There has been NO indication that the administration would support retroactive application of any proposed changes

I can't absolutely guarantee that future changes will not affect exisiting borrowers, but in my analysis such a scenario would be unprecedented and contrary to law. I encourage student loan borrowers to continue to review and respond to proposed policy changes, not so much because your own benefits are under attack, but in order to preserve and enhance existing debt relief programs for future borrowers.