Trump’s Budget Could Eliminate Public-Service Loan Forgiveness. Here’s What to Know.

Budget documents obtained by The Washington Post paint a bleak picture for many federal education programs: The newspaper reported on Wednesday that President Trump’s administration plans to cut them by a total of $10.6 billion. The proposed education budget would cut spending on programs in secondary education in order to funnel some of that money into school-choice programs, which have long been a major focus for Education Secretary Betsy DeVos.

In terms of money for higher education, the proposed budget would reportedly cut funding in half for the federal work-study program, and would sharply reduce grants focused on career and technical education. The most drastic change, however, may be the budget’s proposed elimination of the public-service loan forgiveness program, which was initially designed to benefit people who work in the public interest.

A spokeswoman for the Education Department told the Post that the figures it cited were preliminary until they have been released officially, and the White House is expected to release the Trump administration’s full budget for the 2018 fiscal year next Tuesday. Until then, here are a few key things to know about the public-service loan forgiveness program, and its uncertain future:

Congress approved it in 2007 as a way to aid borrowers in public-service jobs.

Those jobs can include work for government organizations or tax-exempt nonprofit groups, among other employers in the nonprofit sector. To receive the benefit, borrowers must make 120 on-time monthly payments — in other words, at least 10 years of such payments — on their student loans while working for a qualified employer. The Education Department encourages (but does not require) borrowers to submit forms certifying that they work for a qualified employer in order to keep track of their progress. Here’s a look at how many such forms the department has processed, as of last September:

Some people believe the program is too generous.

Critics say public-service loan forgiveness could put taxpayers on the hook to forgive huge amounts of student debt, in part because there is no cap on the amount of debt that can be forgiven. A 2014 report found that programs such as PSLF and income-based repayment plans actually encourage borrowers to take on more debt, and in turn give colleges few incentives to hold down their prices, especially in certain types of graduate programs.

The first borrowers will become eligible to receive forgiveness in October.

But earning that forgiveness could pose challenges for many people. According to Education Department data cited in this Chronicle article, 33 percent of employment-certification forms processed by the department by October 2016 were denied, for reasons such as missing information or including loans that do not qualify.

It’s not yet clear how the proposed elimination of the program might affect borrowers who are already on track to qualify — the Post’s report said there are at least 552,931 people who could benefit if forgiveness kicks in as planned in the fall.

Even before news emerged that the program faced the ax, questions about it were mounting.

Last December, the American Bar Association sued the Education Department over what the ABA described as the department’s retroactive refusal to honor loan-forgiveness commitments it had made to lawyers working in public-service jobs. In March, the department drew intense scrutiny over a legal filing in the case. The filing suggested that borrowers could not count on the word they had gotten from the program’s servicer about whether they actually qualified to receive loan forgiveness.

Despite that uncertainty, experts recently told The Chronicle of Philanthropy that most employees of traditional nonprofit groups need not be concerned about their eligibility.

See this Chronicle article for more details on the PSLF program.

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