The ultimate effect of last Friday’s executive order (EO) — “Restoring Public Service Loan Forgiveness” — is unclear, but it could well affect both community college students and employees. Despite the president’s executive branch action, Congress may also make additional modifications.
President Donald Trump’s rhetoric about PSLF is charged. The EO directs federal agencies to revise program regulations — the underlying statute has not changed — stating that “instead of alleviating worker shortages in necessary occupations, the PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means.”
The PSLF program was created with bipartisan support in 2007. It allows for broad forgiveness of federal loans if a borrower repays loans for 10 years under specified repayment plans and works at eligible organizations, including most employers in the nonprofit and public sectors.
However, when applications became technically eligible for forgiveness during the first Trump administration, they were rejected almost as a matter of course. The Biden administration then jump-started application approval, ultimately forgiving more than one million loans that totaled more than $78 billion. (This total is more than two and a half times the annual cost of the Pell Grant program.)
Recent politics
PSLF has drawn the ire of conservative groups, who have argued, among other things, that PSLF is an inappropriate and untargeted federal subsidy, with no limit on the amount of loans forgiven or any income cap, in addition to the wide range of eligible occupations. (President Barack Obama proposed capping the total amount eligible to be forgiven under PSLF at $57,500 as part of his fiscal year 2015 budget).
More recently, PSLF was included on a widely circulated list of potential cuts for consideration during the upcoming budget “reconciliation” process, in which Republican higher education policymakers will scrounge for savings. In this context, PSLF could be an enticing target. Notably, however, eliminating or limiting PSLF was not included in last Congress’ College Cost Reduction Act (CCRA) – sweeping higher education legislation championed by House Republicans.
Absent rarely used executive branch authority, substantive changes to PSLF via regulation as Trump has proposed would need to undergo the lengthy “negotiating rulemaking” process. This would delay, though not necessarily rule out, the major alterations to the program supported by the administration. The text of Trump’s EO does not focus on basic program eligibility, but rather a variety of largely subjective considerations that would be hard to delineate in the black and white of federal regulation. And, as stated, Congress might beat the administration to the punch.
What it means for community colleges
Community college students are generally not thought of within the context of PSLF. Barely more than 10% of all credit students borrow (that number is declining), and the amounts they borrow are modest in relation to those undertaken by other students, particularly graduate and professional students.
However, there are no doubt thousands of community college borrowers pursuing careers in childcare, nursing, teaching and other fields who might ultimately qualify for PSLF; or they might simply work for a nonprofit organization and qualify on that basis. Furthermore, many community college faculty and administrators have borrowed substantial loans to finance their educations and they could potentially stand to lose eligibility and loan relief under potential modifications.
For these reasons, the American Association of Community Colleges will continue to engage with policymakers as they consider changes to the program, whether it be in the executive branch or Congress. As described, modifications to PSLF as we know it could well be on the horizon.
