The news for Public Service student loan borrowers has not been good. Numerous reports show that 99% of Public Service Loan Forgiveness (PSLF) applications are denied. Will the Trump Administration take things one step further and eliminate the program entirely?
President Donald Trump will have a very difficult time eliminating Public Service Loan Forgiveness. Borrowers are protected by federal law, the current political climate, and contracts with the government.
Anyone considering Public Service Loan Forgiveness should understand the threats to the continued existence of PSLF as well as the protections that are in place.
Reasons for Trump to Eliminate Public Service Loan Forgiveness
To date, the Trump Administration has been openly hostile to the “administrative state” and career government employees. As a result, they are not likely to be fans of an expensive government program designed to incentivize career work in public service.
Additionally, Trump has sought to eliminate or cut funding to pretty much any government program that is not related to National Defense. This even includes proposals to eliminate popular but relatively inexpensive programs like Meals on Wheels and the National Endowment for the Arts.
Based upon both the words and actions of the Trump Administration, it is probably fair to conclude that borrowers seeking Public Service Loan Forgiveness do not have an ally in the White House.
What would have to happen for Trump to Get Rid of PSLF?
Public Service Student Loan Forgiveness is the law of the land. An executive order cannot eliminate the program. For PSLF to be removed, it would take a bill getting through both the House and the Senate. Democrats currently control the House of Representatives, and it is unlikely that Democrats would support eliminating the popular Bush-era program. Most political discussion today regarding PSLF revolves around fixing the high rejection rate.
Even if a new law were created that capped or eliminated PSLF, current borrowers working towards forgiveness would likely be grandfathered in under the current rules.
One item working in favor of borrowers is the contents Master Promissory Note or MPN. The MPN is the contract borrowers sign with the federal government to get student loans. Within the MPN is language explaining that borrowers can pursue Public Service Loan Forgiveness. If the government changed the rules for PSLF, it would be violating the contract. The terms of this agreement are part of the reason that current borrowers are likely to be grandfathered into PSLF even if it is eliminated.
The Political Process
Many borrowers are getting caught up in the “fair vs. unfair” or “right vs. wrong” debate regarding this issue. The future of Public Service Loan Forgiveness will be decided in the political arena.
This means that the narrative that plays out in the media will make a huge difference. If the story on PSLF is about wealthy doctors and lawyers getting huge debts forgiven by taxpayers, support will weaken quickly. If PSLF is viewed by the public at large as a program that helps people work in jobs to better their community, the odds of it staying around are much better.
The elimination of bankruptcy protections on student loans should serve as a good example of how things can play out. At the time bankruptcy protections were eliminated, there was a false narrative playing out in the media that doctors with high paying jobs were declaring bankruptcy to avoid having to pay back their student debt. Bankruptcy protections were gradually eroded, and today it is nearly impossible to have student loans discharged in a bankruptcy proceeding.
Keeping the truth about the program and the sacrifices borrowers make to work in public service will be essential to the long-term survival of PSLF.
For any change to happen, it will require action from Congress. One advantage working for borrowers is that the many aids and legislative assistants on Congressional staffs also qualify for Public Service Loan Forgiveness. These individuals have great access to the elected representatives and serve as examples of the value of the program.
However, all borrowers should keep a watchful eye on any PSLF proposals. Borrowers should watch to make sure that changes to the program do not have an exception for Congressional staff members. In the recent health care bill, members of Congress and their staffs were notable exceptions to the new legislation. In the realm of student loans, Congress has already created borrower assistance programs that apply only to their staff members.
If Congress wants to change things, that is their prerogative; but the DC insiders should receive the same treatment as everyone else on this issue. Borrowers need to make sure that Congress is looking out for all student loan borrowers, not just the ones working on Capitol Hill.
Fears about Trump eliminating the Public Service Loan Forgiveness program are justified, but it will take more than just an executive order to make it happen.
For now, borrowers should keep a close eye on any developments in Washington and make sure they understand the Basics and the Fine Print of the Public Service Loan Forgiveness Program. The Department of Education will likely be looking for excuses to deny applicants, so make sure that nothing gets overlooked.