Trump Budget Again Proposes Eliminating Public Service Loan Forgiveness

The administration’s budget again seeks to eliminate the public service loan forgiveness program,

On February 10, 2020, President Donald Trump submitted his budget proposal for the fiscal year 2021. The budget, if adopted, could significantly affect borrowers who have federal student loans. The plan includes around $2 trillion in cuts to student loan initiatives and other safety net programs, including getting rid of the Public Service Loan Forgiveness (PSLF) program and making other cutbacks to education programs.

The PSLF program was initially passed by a Democrat-controlled Congress and President George W. Bush signed it into law in 2007. This program promises loan discharges to borrowers who are employed full-time (more than 30 hours each week) in an eligible federal, state, or local public service job or 501(c)(3) non-profit job, who make 120 eligible on-time payments, and meet other criteria. With this forgiveness program in place, workers with student loan debt have an incentive to remain in lower-paying public-sector jobs. Teachers, nurses, and social workers, for example, can potentially benefit from the program after they've made 10 years' worth of payments. But Trump’s 2021 budget proposal calls for an end to PSLF. With the proposed budget, it’s likely that participants in the current PSLF program would be grandfathered in, which would allow them to qualify for forgiveness, if eligible. However, loan forgiveness wouldn’t be available to new borrowers. Last year’s budget also called for an end to PSLF, but Congress didn’t adopt the proposal.

The 2021 budget plan also calls for an end to subsidized student loans, limits on annual and lifetime borrowing, simplifying student loan repayment plans, and other proposals, like expanding eligibility for Pell Grants. Unlike some plans proposed by Democratic presidential candidates, the proposal doesn’t include a plan for canceling student loan debt.

Ultimately, though, the president’s budget proposal is just that—a proposal. After the budget gets to Congress, any number of changes can and likely will happen. Still, if you have student loans or are thinking about taking some out, it’s worth keeping tabs on this plan as it’s likely that the federal student loan program will change at some point.

Effective date: February 10, 2020