July 06, 2018

ABA Asks House of Representatives to Keep PSLF Program

In December 2017, House Representatives Virginia Foxx (R-NC) and Brett Guthrie (R-KY) introduced the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act. Now, the American Bar Association (ABA) is asking House members to vote the act down to save the PSLF program. Writing on behalf of the ABA, President Hilarie Bass says […]

In December 2017, House Representatives Virginia Foxx (R-NC) and Brett Guthrie (R-KY) introduced the Promoting Real Opportunity, Success, and Prosperity through Education Reform (PROSPER) Act. Now, the American Bar Association (ABA) is asking House members to vote the act down to save the PSLF program.

Writing on behalf of the ABA, President Hilarie Bass says the PROSPER Act could hurt the legal profession. And it’s why she’s asked members to either vote down the bill, or at least remove the provision that would ultimately end PSLF for good.

In the letter, which was sent last month, President Bass writes, “The legal profession is in the front lines of addressing national problems like crime, the opioid crisis, natural disasters, and helping military and veterans’ families access the programs and services they are owed. Without PSLF, the organizations that provide life- and livelihood-sustaining services will be even farther away from being able to meet these important challenges.”

What is the PROSPER Act?

When the Higher Education Act of 1965 was first enacted, it gave colleges and universities more financial resources, and helped U.S. citizens afford a post-secondary education. In fact, most federal student assistance programs started with this bill.

Since then, the bill has been reauthorized numerous times, with the most recent authorization taking place in 2008. Now with the introduction of the PROSPER Act, the Higher Education Act would be reauthorized again if it passes the House and Senate before getting signed in the Oval Office.

While the 500-plus-page PROSPER Act is being sold by the GOP as a reform of the Higher Education Act of 1965, opponents remain skeptical. That said, here are a few major details on what the PROSPER Act currently includes that could impact student loan borrowers:

  • Federal ONE Loan: Stafford and PLUS loans would no longer be available to first-time borrowers after July 1, 2019. These loans, along with any other Direct loans, would be replaced by the Federal ONE Loan. In addition, all federal grant programs would be eliminated with the exception of the Pell Grant, which would get a boost of $300 for students taking 15 credits or more during a semester.
  • Borrowing limits: The new ONE Loan would offer the same types of loans to undergrads, graduates, and their parents as previous repayment programs. However, borrowing limits would vary, hinging on whether a borrower was a dependent or not.
  • No more subsidized loans, new disbursement schedule: Subsidized loans don’t accrue interest while a borrower is attending school. With PROSPER’s ONE Loan program, students in desperate need of financial aid would no longer have access to subsidized loans. What’s more, instead of sending out financial aid once per semester, lenders would disburse funds weekly or monthly. Loan origination fees would also be eliminated as part of the new loan program.
  • Less repayment options: Today there are nearly a dozen student loan repayment plans available to borrowers. If PROSPER passes, only two repayment plans would remain. These plans are:
    • Standard: A 10-year repayment plan that slices debt up into 120 equal payments.
    • Income-based: A 10-year repayment plan that caps monthly payments at 15 percent of discretionary income, with a minimum payment of $25 monthly. Loan forgiveness on principal would no longer be available, but any accumulated interest (beyond the interest and principal you’d pay under a standard plan) would be canceled.

Why Does the ABA Want the PROSPER Act Dropped?

Originally, PSLF was enacted to help address the shortage of people entering public service. So, not only would the PROSPER Act affect those who serve in the legal field, it would impact any public servants who use the PSLF program. This includes public health, education, and safety workers like doctors and nurses, teachers, military personnel, and police and firefighters.

On the ABA for Law Students website, their message to House members was clearly laid out in a note posted to their website, which reads: “PSLF serves an important purpose that benefits the public. Repeal of PSLF would harm state and local organizations that provide critical services to the public, especially for those in rural areas, tribal lands, and other under-resourced communities (e.g., inner-city).

PSLF should be allowed to continue to function as envisioned until there has been an opportunity to assess the impact of the program. Any attempt to reduce or eliminate the program should include an effective alternative strategy for addressing the underlying problem that PSLF addresses.”

Also, according to the website, roughly 80 percent of law students use student loans to attend law school, with the average debt of graduates falling between $88,000 to $122,000. Yet, as a public attorney, most of these individuals will make $50,000 a year, making it a challenge to repay the debt.

As the ABA for Law Students website states, “Law school graduates considering public service would face 20 years or more of student loan payments, during which time their loan balance would increase. These men and women would further need to forego major life decisions and expenses, all in the name of pursuing laudable careers.”

In addition to the ABA, more than 90 other organizations have voiced their opposition to the act. As part of this coalition, a Preserve PSLF website recently launched where likeminded borrowers and organizations could add their support.

What is Public Service Loan Forgiveness?

PSLF gives borrowers working full-time for qualifying employers a way to have their debt forgiven after meeting certain requirements. These include making on-time payments for 10 years (120 total payments) on the following loans:

  • Direct Subsidized Loans
  • Direct Unsubsidized Loans
  • Direct PLUS Loans (for qualified parents)
  • Direct Consolidation Loans

Once a borrower meets all program requirements, including getting approval for the program, any remaining debt that qualifies is canceled by the lender. For public servants who typically make less than their civilian counterparts, the program has proven to be highly popular – so much so that a Temporary PSLF program was launched recently to help people sign up.

Sign up for the Public Service Loan Forgiveness (PSLF) or TEPSLF programs by filling out our free online form or by speaking with a student loan specialist by phone at (800) 771-6358.