Long-term Viability of PSLF for CURRENT BORROWERS

[salsasunrise123]

There are a lot of discussions on here about PSLF in light of Obama's budget proposal last year limiting forgiveness to 57k. However, I would like to know what financial aid officers and similarly situated professionals/experts are saying about the future of the program. There seem to be several points that are often over-looked when talking about the program's future. First, PSLF is in the current master promissory note as a means of loan forgiveness and the MPN is a binding legal contract that we all sign. Additionally, there is the precedence of changes to student loan laws not being retroactive but only applying to future borrowers. Also, the program does not, nor will it ever techniqually require federal funding each year. It was passed by Congress and requires an actual vote to change it at all. Administrative rulemaking cannot change it unless previously changed by a law. Also, the government is not writing a check everytime a loan will be forgiven under this program. What the government does is essentially write it off because they are the ones who originally gave the schools the money in the first place. Furthermore, the government has taken steps anticipating that the program will remain in existence such as creating the emplyoment verification sheet and setting up a separate servicer to service the program.

That said, I would like to hear what financial aid professionals are saying about the longevity of the program...

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[SigmaFS]

Given prior Department of Education action, there may be old borrower/new borrower delineation with new borrowers defined as 1st time federal loan borrowers on or after July 1, 2016. Old borrowers will be grandfathered under the current terms (i.e. no PSLF cap) and new borrowers subject to the proposed PSLF cap of $57,500.

 

[maxxor]

There are a lot of discussions on here about PSLF in light of Obama's budget proposal last year limiting forgiveness to 57k. However, I would like to know what financial aid officers and similarly situated professionals/experts are saying about the future of the program. There seem to be several points that are often over-looked when talking about the program's future. First, PSLF is in the current master promissory note as a means of loan forgiveness and the MPN is a binding legal contract that we all sign. Additionally, there is the precedence of changes to student loan laws not being retroactive but only applying to future borrowers. Also, the program does not, nor will it ever techniqually require federal funding each year. It was passed by Congress and requires an actual vote to change it at all. Administrative rulemaking cannot change it unless previously changed by a law. Also, the government is not writing a check everytime a loan will be forgiven under this program. What the government does is essentially write it off because they are the ones who originally gave the schools the money in the first place. Furthermore, the government has taken steps anticipating that the program will remain in existence such as creating the emplyoment verification sheet and setting up a separate servicer to service the program.

That said, I would like to hear what financial aid professionals are saying about the longevity of the program...

I think it will have more sticking power than people on this board presume. The law market is terrible and a lot of lawyers rely on PSLF in order to survive while doing non-profit work. Some schools are even building PSLF into their law school tuition to where the school pays the IBR/PAYE payments for you while you work at a non-profit (see Georgetown Law). That said, I expect it will be modified with distinction between new and old borrowers (PAYE initially was only for people with no loans prior to July 1, 2007; I think new PAYE was created out of administrative changes to ICR)

 

[NurWollen]

Pardon the noobishness, but I'm considered a current borrower for all my med school loans (direct unsubsidized and grad PLUS) as long as I took the first loans BEFORE any proposed changes to PSLF take place, correct? In other words, I'm graduating from med school in 2017; let's assume that congress passes a cap on PSLF and it takes effect in early 2016. Let's also assume that the changes only apply to new borrowers, and not to current borrowers. Would I still be considered a current borrower for med school loans I take out after the changes go into effect? Because the MPN I signed at the beginning of med school is good for four years, right?

 

[Baller MD]

nvm

 

[The White Coat Investor]

I think it probably will be changed or limited once the NYT runs a headline story: Doctors Forgiven of $400K+ of Student Loan Debt! However, I suspect those currently in med school and residency will probably be grandfathered in. Just my guess, as it's difficult to predict what Congress will do.

 

[NurWollen]

So, since I'm currently in med school, my loans are on an 'in school' deferment, rather than IBR or PAYE, am I considered a current borrower? Or do I have to finish med school and get on IBR/PAYE while the program is still around in its current form?

Obviously no one knows for sure, and obviously the 120 payments don't start until I'm on IBR, but does the language under the current rules apply to people who take out loans after X date, or to people who enter repayment on X date?

 

[bwmd]

So, since I'm currently in med school, my loans are on an 'in school' deferment, rather than IBR or PAYE, am I considered a current borrower? Or do I have to finish med school and get on IBR/PAYE while the program is still around in its current form?

Obviously no one knows for sure, and obviously the 120 payments don't start until I'm on IBR, but does the language under the current rules apply to people who take out loans after X date, or to people who enter repayment on X date?

The thought is that is will apply to new borrowers with loans disbursed after July 1, 2015. Having at least some loans prior to this date would place you under the old regime. Given how changes to the loan system typically work, it's less likely that current borrowers will be blindsided by the changes. But it would certainly change things for the next group about to start.