President Obama recently submitted a budget proposal for the 2017 fiscal year. This starts every year on Oct. 1 and is often met with opposition or support depending on party politics. We thought it would be interesting to write about some of these proposals and how they may impact you. You may or may not already be aware, but within this budget there are a couple of things that will impact the student aid and the repayment process. This year in particular will have an impact on teachers and those whose individuals who are enrolled in the Public Service Loan Forgiveness program.
Teacher Loan Forgiveness
Some good news with respect to teachers who have existing student loan debt. We have previously written about Teacher Student Loan Forgiveness. The Education Department has purposed to increase the existing teacher incentive programs that are currently available. They plan to do by combining the TEACH Grant and the Teacher Loan Forgiveness benefits. It will allow a maximum forgiveness amount of $25,000 for those eligible for the program.
Those individuals who would receive the maximum benefit would begin their teaching career in 2021 and would have to graduate from an “effective preparation program.” Additionally these teachers would need to teach in a low-income school. Other teachers who may not meet all of the credentials may also qualify for up to a $10,000 forgiveness and it will base the forgiveness amount on time spent teaching in outlined “high-need” areas.
Public Service Loan Forgiveness (PSLF)
While teachers have good news, those who enter school planning to enroll in the PSLF, may not have quite the same enthusiasm. In the purposed budget, President Obama plans to cap the forgiveness benefit to $57,500. The reason provided is this proposal is to protect both students students from over-borrowing and leaving taxpayers to pay the rest. As a reminder, $57,500 is the aggregate limit a student can borrow for their undergraduate studies. So most likely, this is a statement that PSLF will release you of your undergraduate studies but not necessarily your advanced graduate degree. If this proposal should pass however, it would not apple to existing borrowers and only future students.
A key piece that was added within the budget was the plan to move toward a single income-driven repayment plan. This would be for future borrowers taking their first loans out on or after July 1, 2017. It mentioned the plan would be similar to the existing REPAYE that is currently in existence. This would of course have both pros and cons as REPAYE may not always be the best option for borrowers. As it stands today there are 8 repayment options currently available which we highlight on our site here. Also it was purposed to make the FAFSA form easier to complete for future borrowers.
It remains to be seen the final reaction from Congress although it appears likely these will be difficult to pass within this election year. One way to look at these proposals are simply directions that leaders may want to head toward the future. We will keep you updated of any pertinent changes to the student loan process.