The presidential party conventions are over, and what seems like the “election that never ends” will actually be over in less than 100 days.
A lot is being said about this election – that it’s the most important in a generation; that it could fundamentally change the United States and its place in the world; that our underlying national values are at stake. All of this may be true, and there’s plenty of analysis out there about how big and important it is.
But as a student loan attorney, I can tell you without hesitation that this presidential election is going to have a real, tangible impact on millions of student loan borrowers. It’s going to have significant lasting consequences. What these impacts and consequences look like, however, is going to depend tremendously on who wins. If you have student loans, you should be paying attention. Here’s why.
The future of income-driven repayment is at stake
Income-driven repayment programs such as Income-Based Repayment (IBR), Pay As You Earn (PAYE), and the new Revised Pay As You Earn (REPAYE) plans are critical programs that allow federal student loan borrowers to have relatively affordable payments based on their incomes. While these programs largely enjoy bipartisan support, some lawmakers have called them to be eliminated, or for the loan-forgiveness safety nets that are critical components of income-driven plans to be removed. (While most borrowers will repay their loans in full under any of the available income-driven plans, under current law borrowers do not have to pay for longer than 25 years).
As more student loan borrowers rely on these programs, you should review the candidates and party platforms to see who is more likely to preserve and expand them. Remember that there can be no federal guarantee of income-driven repayment plans for private student loans, so calls for privatization of the federal student loan system should be considered in that context.
Public Service Loan Forgiveness could be nixed
Millions of borrowers have gotten on track for Public Service Loan Forgiveness (PSLF), a bipartisan program created by legislation that was signed by President Bush in 2007. The program allows borrowers working full-time in public service positions to obtain loan forgiveness after 10 years of qualifying, on-time monthly payments. It is a vital program that bridges the gap between the high cost of education and the relatively minimal financial reward of doing long-term public service work.
In recent years, there has been increasing calls to change, cap, or eliminate the PSLF program because of cost concerns. Meanwhile, the first borrowers scheduled to get their loans forgiven under PSLF will start submitting applications in 2017 – within the first year of the next presidency.
I am absolutely certain that PSLF is going to be a major topic next year in Washington. If you have federal student loans and you work in public service, you should think about which presidential candidate is going to preserve this critical program.
New protections for defrauded borrowers could get implemented, or not
The U.S. Dept. of Education has started moving forward in enacting tough new rules designed to protect students from unfair and deceptive practices by colleges and universities (especially for-profit schools). These new rules were drafted after years of hard work by advocates and policymakers from all sides of the issue, and they provide for the possibility of relief – including student loan forgiveness – for people harmed by predatory schools.
The new rules are scheduled to go into effect during the summer of 2017 – around the time that those first PSLF borrowers start applying for forgiveness. Which presidential candidate is going to preserve and implement these new rules? Which presidential candidate might throw the whole thing out?
There will be changes to student loan servicing and debt collection
The Obama administration has been working on improving student loan servicing and changing incentive structures for federal student loan debt collectors to streamline the experience of student loan borrowers, reduce servicing-related problems, and help borrowers avoid and resolve default. These improvements have been painfully slow in being implemented, and I have major concerns about serious, ongoing problems.
But these issues are not just limited to federal student loan entities and their contractors. Private student loan servicers are no better, in my experience (and I know many of you will agree with me on that). What will happen to student loan servicing if the Obama administration initiatives are halted, or if the entire federal servicing system gets privatized? Will that actually help student loan borrowers? Will servicing improve?
Student loan refinancing may or may not happen
While current federal student loan interest rates are at historic lows, many older federal student loan borrowers are stuck with absurdly high rates from years ago. Private student loan refinancing options have slowly been growing but are still limited to relatively few borrowers with excellent income and credit. Senator Elizabeth Warren has already proposed several comprehensive student loan refinancing bills, but they have not passed the Republican-controlled Senate.
I’ve already written extensively about how impactful a lower interest rate can be for borrowers. But right now, federal student loan borrowers cannot refinance their loans within the federal system. Student loan borrowers who want to lower their interest rates and repay their student loans on fairer terms should pay close attention to this presidential race – whether or not you can refinance your loans is at stake.
The Higher Education Act will be reauthorized
Think of the Higher Education Act (HEA) as the “master” piece of legislation that governs almost the entire federal aid system. It covers college affordability and financial aid determinations; it mandates what schools and students must do to have access to federal loans and grants; and it creates the framework for the entire federal student loan disbursement, servicing, and collections system.
It’s everything. And its provisions typically last for four to eight years before they must be reauthorized.
The reauthorization process is the opportunity for a new Congress and President to make major, lasting reforms to the entire federal aid system by changing elements of the HEA. The current version of the HEA was authorized in 2008 and has been scheduled for reauthorization since 2015, but observers agree it will be reauthorized only after the 2016 election.
The changes that will be made to the HEA – and there will be changes – will impact an entire generation of college and graduate students. This is important.
The fate of Congressional reform proposals depends on the next president
Various lawmakers from the House and Senate have proposed fixes to elements of the student loan system. For example, there’s a bill that eliminates the taxability of student loan forgiveness, an unintended penalty that can harm the very borrowers that income-driven repayment plans and loan forgiveness programs were designed to protect. There’s a bill to allow borrowers to refinance their private student loans into the federal student loan system so that they can be repaid under income-driven repayment plans and be eligible for Public Service Loan Forgiveness. There are proposals to streamline death and disability discharges for struggling borrowers who will never be able to repay their loans. And there have been bills to simplify income-driven repayment and streamline student loan servicing.
None of these bills are going anywhere this year because of Congressional gridlock. But whether these bills advance or not may depend on who the next President is.
Any way you cut it, this election is going to determine who gets to make major decisions about major elements of the student loan system. Programs and options that millions of borrowers depend on are at stake, as well as the possibility of new forms of relief. Do your research, choose carefully, and get out and vote this November!