DeVos wants to cut budget funding for student loan forgiveness
For the third year in a row, Education Secretary Betsy DeVos has proposed ending a loan forgiveness program for public service workers and eliminating subsidized loans for low-income students.
The budget put forward this week by President Donald Trump has little chance of being accepted by Democrats who control one chamber of Congress, but lays out a clear set of priorities for the administration.
Lawmakers have rejected the Trump administration’s previous efforts to cut funding, increasing the Education Department budget instead, even when Republicans controlled both the Senate and House.
DeVos proposed a 12% decrease in funding for her department for fiscal 2020, with similar cuts to student aid that were included in her previous two budgets. The proposed reforms to student aid would save the government more than $200 billion over the next decade, according to the White House document submitted on Monday.
About a quarter of those savings would come from eliminating the Public Service Loan Forgiveness Program for future graduates. The program currently forgives remaining student debt after eligible workers make 10 years of on-time payments. It’s meant to encourage people with student loans to remain in lower-paying jobs that serve the public — like teachers, primary care doctors, public defenders and social workers.
The program, which was created under President George W. Bush, has some critics on the Republican side. But Democrats have often come to its defense.
“I’m greatly troubled that at a time when we face a physician shortage, a growing shortage, you propose to eliminate all of the loan forgiveness programs that are available to get those physicians — as well as law enforcement and teachers — into under-served areas,” said Texas Democratic Rep. Lloyd Doggett Tuesday at a hearing on the White House budget.
But many student borrowers say it’s difficult to maneuver through the program’s red tape and some have found that they weren’t eligible after making what they thought were years of qualifying payments.
Under the administration’s proposed budget, these workers — and other student loan borrowers — would be eligible for a separate student loan forgiveness program that would cancel debt after paying 12.5% of their discretionary income for 15 years for undergraduates and 30 years for those with a graduate degree.
“We consolidate programs to be able to offer one student income-driven repayment plan that we think will provide certainty and allow anyone that’s receiving a payment now to be eligible under that,” said acting White House budget director Russell Vought at the Tuesday hearing.
Currently, there are several versions of the income-driven repayment program available to students — which sometimes causes confusion for borrowers.
The typical plan caps payments at 10% of discretionary income and offers forgiveness after 20 years for undergraduates and 25 years for those taken for graduate-level degrees– regardless of whether someone works in public service or not.
DeVos’ budget also would eliminate subsidized loans which are currently available to low-income students. They don’t accrue interest until after a student finishes college.
But it proposes maintaining current funding levels for Pell Grants for low-income students that don’t have to be paid back — and expanding the program so that the funds are available to students enrolled in short-term career training programs. Though, advocacy groups, like the National Association of Student Financial Aid Administrator, criticized the proposal for cutting $2 billion from the Pell reserve fund.
In the past, DeVos has acknowledged problems with the way student aid is administered.
“We have a crisis in higher education,” she said at a conference in November.
The secretary did ask for an additional $130 million in the budget next year to help the department upgrade its student loan servicing system. The department has created an app for the Free Application for Federal Student Aid and plans to make loan servicing and repayments mobile-friendly as well.
But Democrat and ranking member on the education committee, Sen. Patty Murray, said the proposed budget suggests that DeVos’ priorities lie elsewhere.
“It speaks volumes that instead of proposing steps to help students afford college and pay back their student loans, Secretary DeVos wants to gut hundreds of billions of dollars in financial aid and perpetuate our nation’s student debt crisis,” Murray said in a statement provided to CNN.
The secretary’s budget also requests new funds for K-12 school choice tax credits, called Education Freedom Scholarships. They could be used for both private and public schools. The agency is asking the Treasury Department for $5 billion a year for the new program.
“This budget fully funds what is necessary to continue to educate our children,” Vought said.