Published: Fri, May 19, 2017
Money | By Armando Alvarado

Worries arise over student loan forgiveness program

Worries arise over student loan forgiveness program

The article was based on budget documents obtained by the Post. Overall, the proposed budget would cut $10.6 billion in federal education programs-but put $400 million in expanding charter schools and school vouchers and dedicate $1 billion to encouraging public schools to incorporate "choice-friendly" policies.

The Department of Education did not respond to CNNMoney's requests for comment, and "had no immediate comment" for the Washington Post.

A president's spending proposal has to go through Congress before becoming a budget, so it's possible these cuts will be tweaked or removed from the final version altogether.

Education Secretary Betsy DeVos has said little on the issue of student debt.

As part of its plan to slash the Department of Education's budget by some $10.6 billion, the Washington Post reports that the White House will propose ending the federal student loan forgiveness program for public sector and nonprofit workers, and lengthen the amount of time Americans will have to spend repaying their debts on income-based plans if they borrowed to get an advanced degree. Borrower advocates have been warning for years that a combination of a lack of publicity, very stringent eligibility requirements and confusion about the program could mean that many borrowers may find themselves disappointed when they try to access the forgiveness they've been counting on.

Even if Crooks can remain in the program, he worries that future grads will be discouraged from entering public service jobs if it's no longer available for them. At this point it's unclear if the Trump Administration could affect the program for those who are already enrolled or if it would only shut down the program moving forward. A lawsuit filed in December claims four borrowers were misled into believing they qualified for the program. Trump's budget would streamline those five plans into one and change the payment details. Still, the report marks the biggest sign yet that the worst fears of borrowers relying on the program could come to fruition. For undergraduate borrowers, Trump is proposing (as he did while campaigning) that borrowers pay 12.5 percent of their income for 15 years. Congress set a cap for student loans so interest rates wouldn't skyrocket: undergraduate student loan interest rates can not exceed 8.25 percent. No, DeVos, a woman who admitted to having no personal experience with loans of pretty much any kind, is doing her damnedest to make sure you struggle to pay back your college loans. And don't talk to me about budget savings when this same administration is now planning a historic tax cut for the rich.

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WARREN: Have any of your children had to borrow money in order to go to college?

For example, if you charge $2,000 in expenses each month (and pay off your credit cards each month to avoid interest charges!) and your credit card awards you 1% of your charges ($20 per month), you'd get $240 per year back.

There are two types of loans for undergraduates: unsubsidized and subsidized.

Beyond all that, there are also more modest loan forgiveness programs specifically for teachers and health care professionals who work in high-need areas, including social workers. Interest starts accruing on these loans as soon as you take them out.

So people who planned their financial lives around this program may not need to hyperventilate. The grace period for Perkins loans is 9 months. Last year, the Department of Education changed the rules to penalize loan servicers when accounts they manage go delinquent and default, but those metrics exclude borrowers who defaulted before the new rules.

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