The Congressional Budget Office (CBO) has released a report on options for reducing the deficit: 2019 to 2028 and in it is an interesting section for people hoping for forgiveness of their federal student loan under the Public Service Loan Forgiveness program.
Let’s just hope these proposals don’t become the new law because if so, many people will get a rude awakening. Under the proposal, PSLF loans would not be forgiven for up to 25 years and would be a taxable event.
The Trump administration has already said they want to end the PSLF program.
The CBO PSLF Suggestion
“This option includes two alternatives, which would apply to federal student loans taken out by new borrowers as of July 1, 2019. The first would cap the amount of debt that could be forgiven under PSLF at $57,500—the current aggregate limit on loans to independent undergraduate students. Borrowers with a balance remaining after receiving the maximum forgiveness under PSLF would continue making payments under a repayment plan of their choice, including IDR plans, and, as a result, could receive additional forgiveness after making payments for the required additional time. Because the cap is equal to the limit for federal student loans for undergraduate studies, and because there is no such maximum for graduate studies, the first alternative would mostly affect students who borrow for graduate school, especially those borrowers who have high debt compared with their post-school income.
The second alternative would eliminate the PSLF program. Borrowers would still have the option of choosing an IDR plan and, as a result, could ultimately receive loan forgiveness (albeit at the end of a longer period of making payments). The alternative would affect all borrowers who enter public service with outstanding student loans, but again would have the greatest impact on those who have high debt compared with their income.
Neither alternative would eliminate debt forgiveness under IDR plans.” – Source
But don’t worry, the bad news on cuts doesn’t end there. Check the illustration below for more gems on the butcher block.
I realize difficult budget cuts need to be made, but like the PSLF program, these decisions have far-reaching consequences beyond just the budget component.
Is education worth the investment? The proposed CBO cuts below seem to tell a different story.