Trump Unveils Student Loan Forgiveness Overhaul Plan

President Donald Trump‘s administration unveiled plans to significantly cut the Public Service Loan Forgiveness (PSLF) program. The proposed changes stem from concerns that federal funds have been used to support organizations that the administration claims are “acting outside the law.”

Trump to Cut Loan Forgiveness

Trump’s critics claim he is reshaping the student loan cancellation program into what some fear will become a tool for political retribution, taking aim at organizations that serve immigrants and transgender youth. Government employees including teachers, firefighters and many nonprofit workers can have their student loans forgiven after making 10 years of payments through the Public Service Loan Forgiveness program. The Education Department is preparing an overhaul that would strip the benefit from organizations involved in “illegal activities,” with the final determination left up to the U.S. education secretary. A draft proposal released by the department includes definitions of illegal activity that center on immigration, terrorism and transgender issues.

Concerns

Several advocates raised concerns about the draft proposal after they were invited to weigh in. They believe the proposal will give the department subjective authority to decide if an organization engaged in anything illegal — a power that could be used to remove entire hospital systems or state governments from the program. “That’s definitely an indicator for me that this is politically motivated and perhaps will be used as a tool for political punishment,” said Betsy Mayotte, president of the Institute of Student Loan Advisors and one of the advocates asked to review the policy as part of a rulemaking process.

Those Affected

More than one million Americans have had loans canceled through the program including nurses, college staffers and park rangers. Congress created the program in 2007 to encourage college graduates to work in the public sector, where salaries are often lower than at for-profit companies. The program promises to cancel all remaining debt after borrowers make 120 monthly loan payments while working for any level of government. Currently, nonprofits are also eligible if they focus on specific areas, including public interest law, public health or education.

The Trump Administration

System updates tied to related legal actions against other forgiveness plans have stalled processing for those reaching the end of their IBR payment terms, leaving borrowers in limbo as they await clarity on when forgiveness may resume. “Currently, IBR forgiveness is paused while our systems are updated,” the department said in an updated guidance earlier this month. “IBR forgiveness will resume once those updates are completed.” Erica Sandberg, Consumer Finance Expert at BadCredit.org, told outlets, “Student loan borrowers who anticipated that a portion of their loans would be wiped out are in panic mode.”

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