Republicans in the House of Representatives have released the Promoting Real Opportunity, Success and Prosperity Through Education Reform (PROSPER) Act. The bill seeks to make major changes to higher education. For purposes of simplicity, this blog is going to only discuss changes the bill would make to repayment plans and public service loan forgiveness (PSLF).
You should continue reading this blog if you have or are seeking to use federal student loans because it signals that lawmakers are getting ready to change how federal student loans are repaid. The PROSPER Act, as it exists right now, would make the following changes:
- It would reduce the number of repayment plans: There are currently eight repayment plans offered by the Department of Education, including four income-driven plans. Under the PROSPER Act, you could choose from a standard 10-year repayment plan or a single income-driven plan. There would only be one income-driven plan instead of four. In addition, this income-driven plan would limit monthly payments for borrowers to 15 percent of their income.
- It would eliminate income-driven loan forgiveness: Republican lawmakers responsible for the bill want to reduce the impact income-driven loan forgiveness could have on taxpayers. Presently, you can receive loan forgiveness if you are enrolled in an income-driven plan and make timely payments for 20 to 25 years. This proposed bill would eliminate these loan forgiveness options. However, interest payments would be capped after 10 years.
- It would eliminate PSLF: The Department of Education’s Public Service Loan Forgiveness (PSLF) program would be eliminated by the proposed legislation. At the moment, borrowers in certain public service jobs could utilize PSLF to receive tax-free loan forgiveness after 10 years of timely payments.
Will the PROSPER Act Affect My Student Loan Forgiveness?
Fortunately, changes to loan forgiveness would not affect you if you are currently enrolled in PSLF. The same is true if you are enrolled in REPAYE or PAYE. Borrowers after June 2018 would be the first group affected by these changes. If you use or plan to use federal student loans, then you should watch the PROSPER Act’s progress carefully.
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