Trump Has Proposed a Devastating Cut to This Successful Student Loan Program

May 19th 2017

Mike Rothschild

In a move that could have devastating consequences to half a million Americans dealing with student debt, the Trump administration is set to drastically cut the Department of Education's budget, including completely ending the federal program promising student loan forgiveness for public service workers, according to a report from the Washington Post.

Trump's draft budget is likely to face significant opposition from both parties once it goes to Congress, so a cut to PSFL isn't set in stone.

While the final budget proposed by Trump hasn't been released, documents obtained by several news sources reveal an austere plan to cut the DOE's budget by $10.6 billion, with proposed department spending going towards Education Secretary Betsy DeVos' priority of school choice.

But the effects could be profound for the over 400,000 people enrolled in the Public Service Loan Forgiveness Program (PSLF). This ten-year-old initiative allows student loan borrowers working as teachers, public defenders, rural doctors, in the non-profit sector, or in government (local, state, tribal, or federal) to have their debt forgiven after ten years. The first wave of borrowers is set to have their debt written off in October, and it's not clear how either these borrowers, or those who have more recently enrolled in the program, would be affected.

However, it is clear from the numbers that PSLF is both needed and beneficial to those enrolled in it.

According to a Brookings Institute report, loan balances among program enrollees are extremely high. The median borrower in the program has more than $60,000 in student debt and almost 30 percent have more than $100,000 in debt, much of it at the graduate level. And the number of enrollees has jumped from 25,000 people in 2012 to more than 431,000 now.

In April, NPR asked a variety of folks in the PSLF program about their debt and how ending the program would impact them:

"More than half a million borrowers have signed up for the program. So we put the word out to find out how they were feeling. We heard 'frightened,' 'anxious,' 'uncertainty,' 'regret,' 'betrayed.'

"Sunrise Ayers, who works for a nonprofit providing legal services to the elderly in Boise, Idaho, has about $80,000 in debt. Like many borrowers, she told us, 'A lot of my life-planning decisions were made factoring the loan forgiveness into the equation.' She says she turned down higher-paying jobs in the private sector, for example. 'I would feel very betrayed, for both myself and my two sons, if this program is taken away,' she says. 'I would likely end up paying on my loans until I was in my 60s and would have no ability to save for retirement or to help pay for my children's college.'"

The program has not been without critique—both for its cost and the potential for abuse.

While PSLF has been successful in enticing people to work in traditionally low-paying fields geared toward public service, it's also been criticized for its cost and size.

In fact, the same Brookings report that details the massive debt load of the program's enrollees makes a case for either curtailing or completely eliminating the program due to the complexity of its rules and a lack of a cap on loans for graduate students, who can borrow as much as their degree costs.

In fact, abuse by graduate students has become a key criticism of PSLF. As Slate notes, it has "become more controversial as some have criticized it as a back-door subsidy for expensive graduate degrees—the people who have signed up for so far tend to have high loan balances more typical of someone who went on to get a master's or a J.D. rather than a mere bachelor's."

There has also been confusion about how much PSLF will ultimately cost, with one estimate pegged at $12 billion, far more than was originally planned when the program was passed.

To stem the rising costs of the program, the Obama administration attempted to cap the amount that could be forgiven at $57,500. But that proposal, which might have saved as much as $6 billion according to Congressional Budget Office documents obtained by Brookings, was never was approved.

And with the costs ballooning, PSLF seems like an easy target for the Trump/DeVos agenda of pushing school choice and taking the government out of any aspect of education.

But there have been clear benefits.

But even with the potential cost overruns, the loan forgiveness program has been a tremendous incentive for graduates to pursue careers in lower-paying, public service fields. As one borrower told CNN Money, "with student debt hanging over them, it might not be financially possible for recent grads to commit to public service careers" if PSFL is entirely cut.