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PGPresents’ Statement on Public Service Loan Forgiveness–March, 2017

The Public Service Loan Forgiveness Program (PSLF) was established in 2007 as part of the College Cost Reduction and Access Act (CCRAA) and was designed to encourage student loan borrowers to both enter and remain in public service as a means for helping them manage their student loan debt (for details see www.StudentAid.ed.gov/publicservice). The program as written is neither discipline nor degree specific, and thus applies to all eligible borrowers, including those from graduate and professional degree programs.

Since its inception, there has been considerable concern and resulting discussion regarding the long term viability of the program, especially in light of how long it takes borrowers to qualify (at least 10 years).

These concerns partly stem from proposed changes to PSLF in previous Administration budgets which contained language placing a limit on the amount that could be forgiven under PSLF for graduate and professional school borrowers. Some argue these proposed limits were targeted at highly indebted borrowers from the graduate and professional school communities who could see substantial forgiveness under PSLF, even though these responsible borrowers (who may have incurred substantial opportunity costs on top of the costs of additional borrowing during school) may have higher earning potential.

However, these concerns have been exacerbated with the new Administration taking over in Washington this year, an administration that many would agree has little to no record on public service and therefore may not look favorably on this program at some point.

There is no guarantee PSLF as referenced in borrowers’ promissory notes and “Borrower Rights and Responsibilities” will be available with no changes when these eligible and responsible borrowers have met all the eligibility requirements. We therefore encourage borrowers interested in PSLF to consider the following when determining whether or not PSLF should be part of their own repayment strategy.

  1. Changes in student financial aid, including loan programs, are often “prospective”, meaning changes often apply to a new cohort or new group of borrowers. There are many, including PGPresents, who think that any proposed changes in PSLF will not impact current borrowers, including those already in repayment, that these borrowers will be “grandfathered” into the current provisions which do not contain any limits to the forgiveness amount. However, there is simply no guarantee such would be the case.

  2. The proposed limit to the forgiveness amount for graduate and professional students in prior budgets was simply that, a proposal, similar to a request for spending and budget cuts. While executive orders have been common with the new administration, the regular process for any changes to student loan programs becoming law is generally a lengthy and cumbersome one. While some changes could be done through the regulatory process, that can be lengthy and cumbersome as well.

  3. PSLF currently operates like an “entitlement” program, and thus is not currently subject to annual appropriations. This year (2017) will mark the first year that any borrowers become eligible for PSLF, 10 years after passage of CCRAA. PGPresents believes the first medical school graduates to see the benefits of PSLF will be in 2019, 10 years after the inception of Income Based Repayment (IBR), as up until 2009, many medical residents postponed repayment through the Economic Hardship Deferment (eligibility for this deferment changed dramatically in 2009).

We understand borrowers interested in PSLF often face important decisions regarding whether or not to make minimum payments with Income-Driven Repayment (IDR) plans such as Income Based Repayment (IBR), Pay As You Earn (PAYE), or Revised Pay As You Earn (REPAYE), under the hope of forgiveness after the requisite number of payments or to take control of their debt by making aggressive payments which would serve to decrease the potential forgiveness amount under PSLF. There are also important decisions for married borrowers or those about to be married regarding how to file taxes, since the inclusion of spousal income can impact repayment under these plans. Please see our IDR comparison chart for more information on the differences between IBR, PAYE, and REPAYE.

However, when borrowers entering residency are not sure of their long term career plans (which is often the case), we support the idea of “preserving the option” for PSLF by encouraging borrowers to start making payments on their Direct Loans with an IDR, as long as their employer is an eligible PSLF employer. This often means their actual decision about pursuing PSLF will come towards the end of residency or fellowship when they are considering employment possibilities in either the non-profit or for-profit sectors.

PGPresents encourages all borrowers who are using Income-Driven Repayment plans such as IBR, PAYE, or REPAYE as part of their repayment strategy (especially those doing so as part of a repayment strategy tied to PSLF) to reevaluate their strategy on a regular basis, at a minimum when they renew or recertify their payment amounts under these plans.

We also encourage borrowers interested in PSLF to complete and submit the PSLF Employment Certification Form (ECF) available at www.StudentAid.ed.gov/publicservice to ensure help with tracking eligible payments. There has been some discussion that borrowers may be protected from any future changes if they already have payments being tracked for PSLF eligibility.

While the Public Service Loan Forgiveness program will clearly help some borrowers, we encourage borrowers not to let PSLF drive their ultimate career decisions.

Finally, we encourage anyone interested in PSLF to keep their radar up regarding possible changes and to work closely with their local and state representatives, school aid professionals, and any relevant health professions associations to ensure that any changes made to PSLF are done prospectively and thus do not impact current borrowers and those already in repayment.

Should you have additional questions about PSLF, please see www.StudentAid.ed.gov/publicservice referenced above or contact PGPresents at paul@PGPresents.com for a consultation to see if PSLF should be part of your repayment strategy.