RestoringPublicServiceLoanForgiveness
POLICYUPDATE
CongressestablishedthePublicServiceLoanForgivenessprogram(PSLF) in2007toincentivizehighlyskilledworkerstotakejobsinthepublic sector.Underthisprogram,aftertenyearsofstudentloanpayments,the remainingloanbalancesforemployeesofgovernmentagenciesand eligiblenonprofitsisforgiven.OnMarch7,2025,PresidentTrumpsigned anexecutiveordertoamendtheeligibilitycriteriaforthePSLFtoexclude organizationsthatdodiversity,equity,andinclusionwork,support gender-affirmingcarefortransgenderyouth,orofferservicesto immigrantsofalllegalstatuses.Thisorder,combinedwiththemassive federallayoffstheDepartmentofGovernmentEfficiencyhas administered,willjeopardizeloanforgivenessformanyBlackpublic servants,asBlackpeoplearehistoricallyoverrepresentedinthefederal workforce.
BecausetheorderrequirestheSecretaryofEducationtoamendthe federalcode,whichisanextensiveprocess,theorderhasnotyettaken effectandisnotcurrentlyfacinganylegalchallenges.However,this orderwillhavesignificantimplicationsforthemorethan8millionBlack borrowerswhocurrentlyhavestudentloandebt.Astudyfromthe BrookingsInstitutionfoundthattheBlack-whitedisparityinstudentloan debtmorethantriplesfouryearsaftergraduation.Studentdebtcan delayretirementforBlackworkers,andhighinterestratescanballoon costsforlenders,whichisassociatedwithhigherratesofdepressionand anxiety
CurrentLandscape
Whilethisorderisnotcurrentlyineffect,Congressisseekingtoreformthe federalstudentloanprocessthroughlegislation.OnMay2,2025,theHouse EducationandWorkforceCommitteepassedtheStudentSuccessand TaxpayerSavingsPlan(SSTSP)whichreformsPellgrants,altersfederal studentloanallocation,andtightensthecriteriaforincome-basedloan repaymentplans.TheSSTSPisnotastandalonebill;itisanewprovisionthat willbeaddedtothe2026fiscalyearbudgetinaccordancewithPresident Trump’sproposedtaxcuts.Republicansonthecommitteeboastthatthe planwillsave$330billionintaxpayerdollarsover10years.
Ifimplemented,theSSTSPwill:
Extendthewindowforloanforgivenessfrom20-25yearsto30yearsand eliminatecurrentprotectionsfornewborrowers.
Capfederalstudentloanborrowingat$50,000forundergraduatesand $100,000forgraduatestudentsbeginningwiththe2026-27schoolyear. Currently,federalstudentloanborrowingcapsarebasedonstudent statusandyearsofenrollment,notauniformlimitforallstudents.If thecostofattendanceexceedsthefederalcap,studentswillhaveto pursueprivateloans,whichoftencarryhigherinterestrates. Implementastandardrepaymentassistanceprogramandprohibitthe SecretaryofEducationfromestablishingotherloanforgiveness programs,puttingthePSLFinjeopardy.
Terminatesubsidizedloansforundergraduatestudents,whichare designedtoassistlow-incomestudentsbyofferingafixedinterestrate. Increasethenumberofcreditsthatfull-timePellGrantrecipientsmust enrollinfromtwelvecreditsasemestertofifteen.
Lowerthecut-offforPellGranteligibility.
PellGrantsareafinancialaidoptionforstudentsfromfamilies makinglessthan$40,000ayear.Nearly60%ofBlackcollege studentsreceivePellGrants.ThemaximumPellGrantisroughly $7400persemester,butmanystudentsreceivelessmoneythan that.Byincreasingthecreditrequirement,theSSTSPmakesitmore difficultforworkingstudentstopayforcollegebyrequiringthemto enrollinadditionalcoursework.Thiswilldisproportionatelyimpact Blackstudents,astheyaremorelikelytotakeoutloansandleave collegewithmoredebtthantheirwhitepeers.
OnMay22,2025,theHouseofRepresentativespassedH.R.1,theOneBig BeautifulBillAct,whichincludestheSSTSP.Thebillnarrowlypassedby onevote,215-214,withallHouseDemocratsandtwoRepublicansvoting againstit.TheSenateisnowdeliberatingonthebill,whichwillneed50 votestopass.TreasurySecretaryScottBessentstatedthattheTrump AdministrationwouldliketopassthebillbyJuly4,butthenegotiations areongoingandwilllikelyunfoldthroughoutthesummer.
