Proposed PSLF and IDR Changes

Proposed Changes to Federal Student Loan Repayment Programs

The PROSPER Act

The PROSPER Act (Promoting Real Opportunity, Success and Prosperity through Education Reform) was introduced on December 1, 2017. The overall goal of this act is to reduce the role of taxpayers in funding federal public education by eliminating forgiveness of student loans and reducing the number of repayment programs.

Proposed changes:

1) Immediate elimination of the Public Service Loan Forgiveness (PSLF) program.

Background

This program was created in 2007 by President Bush to inspire more graduates to enter public service roles. To date, roughly 600,000 people have signed up for this program.

Current Benefits

PSLF forgives federal student loans for borrowers who:

1-Are employed full-time in an eligible federal, state or local public service or non-profit job and

2-Make 120 eligible on-time payments over 10 years.

2) Changes To Student Loan Repayment Plans

Student loan repayment plans would be reduced from eight options to two: a standard, 10-year plan and a single Income-Driven Repayment (IDR) plan.

Today

Under current IDR plans such as PAYE and REPAYE, borrowers can cap their monthly payments based on their earnings and then have their remaining student loans forgiven after 20 years for undergraduate degrees or 25 years for graduate degrees.

Proposed Changes

The single IDR plan under PROSPER would eliminate forgiveness entirely, but cap interest payments after 10 years.  An earlier version called for IDR to be 30 years and 12.5% of adjusted gross income with loan forgiveness at the end of the 30th year.

Grandfathering of existing enrollees for PSLF and IDR plans

Existing borrowers enrolled in either PSLF or a soon to be eliminated IDR plan would most likely not be impacted.

Borrowers who would consider enrolling in these programs after June 2018 would be impacted, i.e. i.e.PSLF would no longer be available and only a single IDR plan would be available.

This would also mean that if you’re currently in school, no forgiveness options would be available to you when you graduate.

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