I’ve read through the 500+ page bill the House GOP introduced that would totally change everything we know about borrowing for grad and professional school. It’s called ‘Promoting Real Opportunity, Success and Prosperity Through Education Reform’ (mercifully shortened to the PROSPER Act).
The sweeping changes to the student loan system that I’ve long predicted have finally been put to paper. Many of the broad plans that President Trump proposed are in this bill, but there are also some big surprises. The House GOP Prosper Act completely repeals all forms of loan forgiveness for all new borrowers only starting July 1, 2019.
I want to caution that this is the opening salvo in the fight to reauthorize and rewrite the Higher Education Act of 1965. That said, the final legislation could look a lot like this, so I wanted to update you on what this would mean for your pocketbook. If you’ve got more than $100,000 in loans (or might one day), you should definitely watch the video below and read this post. Please leave questions or comments below and I’ll get to each one.
[Update 2/20/2019: The Prosper Act is effectively dead after the Democrats took the House, so this article can serve as an interesting look back on what might’ve been. Higher Education Act re-authorization could take place as soon as this summer, and there will be much debate over the final product with split control of Congress. Nothing is changing right now.]
Federal ONE Loan Program Would Replace Federal Direct Loans
A big part of the House GOP plan is to stop the Direct loan program cold in its tracks. The new program that all federal loans would be issued under would be called the Federal ONE Loan Program. Public Service Loan Forgiveness (PSLF), Pay As You Earn (PAYE), Revised Pay As You Earn (REPAYE), and Income Based Repayment (IBR) would no longer exist.
With Federal ONE loans, you’d have 2 options to make payments. You could use the Standard 10 Year Plan, which exists today. The alternative would be a single income driven repayment program. While this program would have no forgiveness component, it places a cap on the maximum interest you would have to pay. That cap is equal to the full interest charged if you paid back your loans on the Standard 10 Year Plan.
On the down side, you would be responsible for paying back the full principal and interest calculated under the 10 Year Plan. On the plus side, you will never have to pay more than this total sum, even if it stretches out for many years on the income based program. That is how I read this proposal.
Who Would Use Federal ONE Income Based Repayment?
Using the income based repayment approach for Federal ONE loans could be a much smarter option for professionals like veterinarians, chiropractors, and others who graduate with high debt to income ratios.
Say your total projected repayment was $200,000 on the Standard 10 Year Plan once you graduated. Would you rather pay $200,000 over 10 years or 20-30 years? Stretching it out is clearly the better choice because of inflation (as long as your income stays low). The cost of goods and services goes up over time. Hence, the Standard 10 Year Plan could be way more expensive than income based repayment on the Federal ONE Loan Program for low income earners.
For high income borrowers who would repay the full amount in less than 10 years, refinancing would still be the better choice.
What Would Happen to Borrowers Who Already Have Direct Loans?
Under the PROSPER Act, the government would deal with legacy Direct loans similar to how they currently handle old loans from the Federal Family Education Loan (FFEL) program.
In other words, the Direct loan program would cease issuance when the PROSPER Act takes full effect, but existing loans would continue to be around. Those who have Federal Direct loans would operate under the promissory notes they hold.
That means you keep REPAYE, PAYE, PSLF, and forgiveness. This is the stuff that I’ve been helping clients figure out for the past couple years (whew!)
The House GOP is Focusing Their Fire on the Future
There is precedent for this Federal Direct to Federal ONE change. In 2010, the Federal Direct loan program began issuance in huge volume and the FFEL program stopped. The people with the FFEL loans from before 2010 still kept them. These old loans just didn’t qualify for any of the great new repayment programs like PAYE, REPAYE, or PSLF.
That makes sense because these older loans have legal agreements that borrowers signed that make no mention of enhanced federal programs. The only way to gain access to better repayment programs for folks with FFEL loans is to create an entirely new Direct Loan through consolidation with the government.
Stay with me here. You gain access to the new programs because your promissory note is new. That new agreement lists all the new programs you now qualify for.
In the same way with current borrowers on the Direct Loan program, you have a legal agreement you signed. Congress isn’t planning on taking away your loan repayment programs anymore than they’re planning on extending PAYE or PSLF to folks who borrowed before 2010. Why? Because they want to avoid making retroactive changes. That is the biggest sigh of relief.
Read more: What to do if You’re Worried About Trump Repealing PSLF?
Expensive Grad Schools Could be Totally Screwed if the PROSPER Act Passes
Also baked into the bill is a $150,000 cap on grad school borrowing. For programs like dentistry, medicine, veterinary medicine, and other health professional graduate programs, the cap is slightly higher at $235,500. Many of you would not be able to pay for school at current tuition prices under this cap. I expect students currently enrolled in a grad school program to be allowed to borrow as much as they need for the rest of their degree programs. The big change would happen for students starting their first day of class after June 30, 2019.
Something would have to give. Private professional schools would start accepting students from wealthier backgrounds, cut tuition, partner with private lenders to bridge the financing gap, or greatly reduce enrollment.
If I was an administrator at Georgetown Law School, NYU Dental School, St. George’s Med School, UPenn College of Veterinary Medicine and the like, I’d be trembling in fear right now. This Act could slash grad school funding by 50% or more at schools like these. I think we’ll see lobbyists for these kind of institutions gear up for war in the coming weeks.
I wouldn’t be surprised if we even saw entire colleges shutting down as a direct result of the Federal ONE loan program.
I’m Still Trying to Figure Out What the Impact Would Be on Student Loan Refinancing and Origination
For lenders out there that replace costly federal student loans with cheaper private ones, I’m not yet sure what the impact of this bill would be. The government currently charges a margin of 4.6% above the 10 year treasury rate for grad school loans. The Federal ONE program would change that to 3.6% but with a much lower cap on what you could borrow.
Stretching your loans out forever to minimize the cost of repayment in today’s dollars could look a lot more appealing than moving your loans to a private lender for 0.5% to 1% savings. That said, I believe private lenders would move heavily into the origination market.
Assume a dental student needed to borrow $300,000 to get her DDS degree. The Federal ONE program would only lend her $150,000. Hence, a private lender would have to give her the remaining $150,000.
The lack of PSLF and other programs like PAYE and REPAYE would drive a huge number of physicians, dentists, attorneys, physician’s assistants, and others to refinance since they’d lack a useful government alternative.
My instincts tell me that the Republicans want the private sector to be more involved in this space, not less involved. I think this bill could be a boon to private lenders. Borrowers will not want to keep their loans around forever until they’re paid off.
What’s Next for the House GOP PROSPER ACT and the Federal ONE Loan Program?
We have a long way to go, as the Senate has said they will drop their version in March. I seriously doubt Congress will meet their goal of having this all in place by summer 2018. Expect to see explosive battles over this. After all, the PROSPER Act could threaten the very existence of a lot of the higher cost educational programs around the country.
For my clients, I would say don’t worry. For those thinking about starting a graduate program after June 2019, make dang sure you can afford to pay for it. If you have over $100,000 in student loans and want clarity, contact me and tell me about your situation. We’ve helped hundreds of borrowers make a long term plan.
Please share your thoughts about this proposed legislation in the comments. I’d love to hear your concerns and questions. Here’s a link to the full text of the bill if you’d like to read it.
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Thank you for the clear, concise write up!
As a current medical school student with a future of debt, the new income based repayment plan really doesn’t sound all that bad
It doesn’t until you realize that it’s capped at $150,000, and you’d have to take out private loans most likely to make up the gap. Then your income based repayments will force you to pay back the $150,000 pretty quickly.
Clarifying question here. Would the PROSPER act affect students already enrolled in graduate school, who are hoping to enroll in student loan forgiveness, but who won’t graduate till after June 2018?
According to the first draft it shouldn’t. You should be grandfathered in. What I’m trying to figure out is if you would still be borrowing under the Direct Loan program or the new Federal ONE program. I believe that the answer is yes that you’d be taking on more Direct Loans and the future students would be stuck with ONE issuance.
Is this something that can be passed through reconciliation–with 51 votes? Or does it need the 60 votes as regular legislation?
Thanks for this article–very helpful.
From what I’ve read, they’re saying it’s going to need 60 votes since it’s a complete overhaul of the Higher Education Act of 1965.
So, it won’t pass then?
I think it could in some form.
Hi, I will be graduating with a doctoral degree in 2019. I was considering the PSLF program because I will have around 400k in loans when I graduate. Should I still consider a Fed govt job or just work privately and pay all loans on my own? I don’t trust that the PSLF program will be around when I graduate or that the govt will uphold their agreement with participants to forgive debt. (I ask now because I am currently picking my rotations based on whether I will work for fed govt or in private practice.) Thx for your help!
Even for borrowers who are already certified on PSLF and are working towards it, I tell them to pick the job based on their personal and career preferences. Even on 400k, the yearly pretax value of the forgiveness is likely between $40,000-$80,0000 a year. If you can earn more than that in private practice and are indifferent between the two, then private practice is the way to go. If you would make way less than that in private practice, then I believe you’ll be grandfathered in on PSLF as long as you already started your doctoral program. I would trust PSLF more with this bill because the House GOP (most likely to eliminate PSLF for current borrowers) has proposed grandfathering this group in! They’re essentially ceding the argument it seems to me.
Where in the bill does it say that current PSLF “enrollees” will be grandfathered in? Since the mechanism by which loans are forgiven under PSLF is a certification of *past* qualifying payments, no one is really “enrolled” in the program. We are just counting on the Feds to stick by their word.
The only way I can see this working is that ANYONE with loans that originated under the old scheme will be eligible to certify 120 qualifying payments and have their loans forgiven under PSLF at any time, but I can’t find that in the bill. Help please?
On page 248 they make mention of amendments to section 455 of old statutes where PSLF is present. They also request in great detail a statistical breakdown of loans forgiven under PSLF on page 84. While it’s not directly stated, this deal definitely implies and codifies PSLF as a thing for Direct loans while shutting down future borrowing w a 1.5 year sunset to allow people to make changes of plans for their higher education decisions.
…Since the mechanism by which loans are forgiven under PSLF is a certification of *past* qualifying payments, no one is really “enrolled” in the program. We are just counting on the Feds to stick by their word. “… Not true, I have done all the necessary paperwork and have done my yearly re-certifications exactly as they have requested. There definitely is a PSLF program and they make us jump through hoops to make sure all the “I”s are dotted and “T”s crossed. They have a contractual obligation to honor their commitment. I know there have been many stories in the media about people being cast aside and not having had their agreements honored. However, if you read these stories carefully these people did not do their due diligence and fill out the correct forms, some just assumed that they were signed up and never did anything except show up to work and make their payments on time. There is the case of the 503c attorneys but I believe that these attorneys will win their case. I and many others have made life changing decisions based on the promises of this program. I can see no legal way they would be able to welch on their commitment.
I have been on IBR for 6 years , and just learned that I can switch to REPAYE ( which I’m in the process of doing ) I currently owe 83K in loans . I’m so depressed . I am a substitute teacher ( I got the wrong license .. long story ) anyway , I’m so scared about that tax bomb ! I have no idea what it will be , and I’m worried somehow my husband and I will lose our house over this . Is there any hope for me ? I am willing to pay you for your help!
You’re definitely not going to lose your house Chelsie. You can check out studentloanplanner.com/help to see more info about working with one of our CFP consultants. It’s probably the right thing to do to get on REPAYE but it might make sense to look into IBR filing separately too depending on your family income.
Thank you !!! I was on IBR filing separate but I’m going to do the same for REPAYE. Do you think it I put like 100 away a month in a mutual fund I would be okay for that tax bomb in 19 years ( that’s what I have left ) I’m at 83 K now. Do you think it’s at all possible that they might cancel this forgiveness or do you think if we are on the plan we are safe ? I will check out your consultants too! I appreciate your response so much !!!
Well Chelsie be careful about REPAYE because you’re not allowed to file separately. If you situation is complex might be worth getting a plan for it. But yes I think 100 a month is reasonable if you did it for 20 years. Forgiveness isnt going anywhere if you clearly qualify now I think
So, if I understand correctly, the current ICR plans will be honored? I am currently doing Ibr, in the private sector. My loans are five figures and consolidated. I am due forgiveness after a certain amount of years, this bill isn’t supposed to affect me, right?
If you’re using IBR then you probably need to be using REPAYE, but yes you’d be grandfathered in. No one should use ICR it’s a terrible plan.
Thank you for the response. As it concerns REPAYE, will this bill allow me to switch into it? If it does, how long do I have to make the switch? (Btw, I am considering using your consultation service.)
I’d answer even if you weren’t Brandon 🙂 Basically yes you would be able to switch so long as you don’t have any Federal ONE loans. That means starting the program of study no later than July 1, 2019. The issuance of Direct loans is guaranteed through October 2024 in this bill.
IBR can make more sense than REPAYE if you’re married.
Depends what the tax penalties are. If you’re the higher earning spouse w the debt then more often than not I find REPAYE to be better. If you’re earning about the same then I might agree as long as PAYE isn’t an option.
Yeah PAYE not an option and we both have debt (and earn about the same), so IBR works best for us.
Maintaining the legacy is nice and I feel fair as I am currently in the forgiveness program and in part my career has been directed so that I work for 503c corporations in order to maintain my forgiveness. So if they took that away I would feel a little burnt.
For future I feel that overall the tentative plan looks good. Simplifying the repayment plans is great, I never understood why they kept adding more and more when they were all relatively the same. I like simple. As for the doing away with the forgiveness I think that could be good as it feels weird to have something like this have so much control over my life. Debt is bad enough but to have it direct what your career and where is kind of crushing.
So I am starting medical school in July 2018. Given my current undergrad debt and the fact that just the tuition for my school is over 55k a year, that cap would absolutely kill me. I don’t have great credit either, not that it’s terrible but it certainly isn’t what I would hope. From what I’ve gathered, you said that people starting their programs after June of 2019 would be of the biggest concern? So would I be able to use Grad Plus Loans? I will graduate in 2022, I just I’m nervous that I would have to drop out in my third year because I’m out of money. Absolutely no chance of financial help from family, not for lack of desire on their part.
Technically based on these rules you should be ok. They’re allowing folks to borrow through 2024 according to the text of the bill.
Would people on REPAYE be able to switch over to the new plan? If so how would the cap work?
Using some reasonable assumptions, I think I would end up paying more in the remaining 20 years of my REPAYE period even though there would still be hundreds of thousands of dollars of debt to discharge at the end than I would if I was able to cap the interest at the ten year rate base on the original amount (i.e. not including the already capitalized interest) but had no forgiveness opportunity.
Well you would likely have to use the standard 10 year amount from when you consolidate loans and turn them into Federal ONE loans. So it wouldn’t be advantageous to switch for most people is my guess.
Hi Travis,
I have just started a graduate program, this fall, for social services and will have a total balance of about $160k in Direct Loans when I graduate in June 2019. I am very confused about if I would be eligible for PSLF if I entered repayment soon after graduating.
Your discussion on the importance of my Promissory Note and the handling of “legacy” Direct Loans gives me hope that I would still be eligible for all of the repayment options that exist under current law. Am I correct? I feel like I am reading contradictory information about this all over the place. Nobody seems to be able to clarify what “enrollment after June 2018” refers to. As in, enrolling in school or in a repayment plan (like PSLF)?
Thank you!
First it looks like they mean enrollment after July 1, 2019 in a program of study for the first time. They also carve out Direct loan issuance as an option til 2024 to protect folks enrolling before that 2019 date. That means the PSLF program would be written into these promissory notes that people would take out after 2019. Hence, you should be ok going for the PSLF program under the current terms of the GOP bill Larry.
Very helpful, thank you Travis! I’ll keep an eye out as the legislation evolves.
If I start my second masters in August or October 2018 and I will be over the aggregate limit for direct loans, I can still request for plus loans? I know this question is probably redundant.
You should be fine Kin because the limit looks like it’s July 1, 2019, so you could use Direct Grad Plus if need be to meet funding shortfalls.
I have FFEL loans and Direct loans. I am pursuing my second master’s degree. I will have over $250,000 of debt upon completion of my degree in 2019. I am afraid that I will not be reconsolidate all my loans under the direct loan program. Do you think I will still have the option to reconsolidate under the direct loan program after graduation in 2019?
Most likely you would, but if there’s a chance to consolidate the FFEL loans now I sure as heck would.
So, so long as you are out of school, you should be able to switch between current plans? For example, I graduated and my loans are in repayment. Could I switch from IBR to REPAYE? How long would I have to make the switch?
I can see you answered it above, thanks.
Hi- Thanks for the useful info!
with these situations that you’ve mentioned above, would you start dental school in this upcoming year (June 2018)with a total of 400K balance after graduation?
Am I even able to borrow more than 150K if I’m starting this upcoming June(2018)?
Yes it sounds like you’ll be grandfathered in w the current Direct Loan program rules and will be able to borrow max COA
Do you find it wise to spend $400 on Dental school and repay it with the 10 years of interest? Do you find it hard to repay all this amount after the graduation?
I know you deal with a lot of dental students who are graduated already and struggling with repaying their loans.
What would you suggest with all these upcoming situations?
It’s very difficult in the absence of income based repayment. The upcoming changes just make it all the more important to be going into dentistry for the right reasons. If you’re afraid of the debt then take a professional career in something requiring a BS or BA. If you want to go into dentistry to work 4 days a week and make over $200,000, don’t do it is my suggestion. Be willing to make anything to do dentistry bc you love it that much. Also don’t hold any illusions that if you go, you will be doing this for the foreseeable future. I think financially it’s a viable choice if you’re truly passionate about it.
Thank you for this. I will be starting dental school in Fall 2018, and the total “max” CoA for four years is around $400k. I am fortunate to have the option of borrowing from family members and repay after graduation with no interests. However, if I loan from the federal government and plan on utilizing PSLF, I may be paying less than $400k. What would you suggest in this case?
Definitely do NOT borrow from family members if loan forgiveness is on the table. Unless you’re going to make 300k+ and work at a for profit employer, there’s no sense in using family resources if you’re starting in fall 2018.
If I am planning on utilizing PSLF, it makes sense to borrow the max COA and save the extra right?
Also, if I plan on doing a specialty program after graduation, will I still qualify for the current loan program or federal ONE program?
Thank you Travis.
If you start the specialty program after July 2019, then that wouldn’t be eligible for Direct loans and you’d have to use ONE loans. This has a precedent because many folks borrowed under the FFEL program AND the Direct program and straddle the 2 systems. We’d have to run the numbers at the point you’re looking to go to the specialty program to see if it made financial sense under the new rules.
So, if I am finishing my program before July 2019, I will still get public loan forgiveness right?
You should under the current proposal yes
My wife is an RN working for a local school district, and is planning to use PSLF to have her existing Direct Loans forgiven. My oldest daughter starts college this fall; would it be possible under the proposed PROSPER Act to take out Parent PLUS loans as needed for her schooling, consolidate them into my wife’s existing Direct Loans when my daughter graduates in 2022 and then have the consolidated loan balance forgiven under PSLF?
My guess is that consolidations on Direct loans will get shut down in 2019 to prevent this, but I honestly can’t say yet. The proposal is still too broad. I would borrow with the expectation that anything you take out after 2019 including consolidation loans would not be forgivable.
Thanks for replying so quickly, Travis! That’s a bummer but I wouldn’t be surprised if the government tried to thwart my plans since it does seem like an awfully nice loophole. 🙂 From what I can tell, the only income-based repayment plan that’s available for consolidated Parent Plus loans is ICR, which I know you’re not a fan of.
Great article! This really put my nerves at ease.
I work at a 501(c)(3) non-profit with $122,000 in student loans from graduate school and two weeks ago I applied to the Public Service Loan Forgiveness (PSLF) program. I called them last week and they said there won’t be any problem with em being approved. I’m happy to know that the Public Service Loan Forgiveness (PSLF) program won’t be taken away from me.
In the long run I think this plan by the GOP is a very good one. University prices are too high and the more the Federal Government loans out then it’s a gravy train for universities and they have no motivation to cut costs. This is good. On a personal level I’m glad that I’ll be ok.
Hi Travis! I’ve got a question that hasn’t been answered yet. Suppose a student has been using Direct Unsubsidized and Direct PLUS loans to pay for a master’s degree, and graduates with that in Spring 2019. Then s/he starts a PhD program at a different school in Fall 2019. Would s/he be able to access Direct loans through 9/3/2024 to help pay for the PhD program? Because it’s a program begun post-June 2019 – but by a borrower with an outstanding Direct loan balance. I read the relevant part of the bill and it appeared that this would be allowed. What do you think?
It will not be allowed. If it’s a new program new school post summer 2019, then you would not be able to access the Direct loans. So I would think long and hard before pursuing that plan or try to accelerate it.
Travis, great article! Are you sure about this rule? Can you post the relevant part of the bill that states that ALL BORROWERS who start a program after July 2019 are required to borrow only One Loans, and not just NEW BORROWERS? (Sorry about the caps, no italics for emphasis…)
As far as the discontinuation of Direct loans, The Bill says:
“(d) Student Eligibility BEGINNING With Award Year 2019.—
“(1) NEW BORROWERS.—No loan may be made under this part to a new borrower for which the first disbursement is after June 30, 2019.
“(2) BORROWERS WITH OUTSTANDING BALANCES.—Subject to paragraph (3), with respect to a borrower who, as of July 1, 2019, has an outstanding balance of principal or interest owing on a loan made under this part, such borrower may—
“(A) in the case of such a loan made to the borrower for enrollment in a program of undergraduate education, borrow loans made under this part for any program of undergraduate education through the close of September 30, 2024;
“(B) in the case of such a loan made to the borrower for enrollment in a program of graduate or professional education, borrow loans made under this part for any program of graduate or professional education through the close of September 30, 2024; and
“(C) in the case of such a loan made to the borrower on behalf of a dependent student for the student’s enrollment in a program of undergraduate education, borrow loans made under this part on behalf of such student through the close of September 30, 2024.
“(3) LOSS OF ELIGIBILITY.—A borrower described in paragraph (2) who borrows a loan made under part E for which the first disbursement is made on or after July 1, 2019, shall lose the borrower’s eligibility to borrow loans made under this part in accordance with paragraph (2).”
That reads to me as though any borrow that has an outstanding Direct loan balance is eligible to continue receiving Direct Loans for an approved program started ANY TIME after July 2019 but before the September 30, 2024 cutoff.
It just says that the rule would go into effect beginning in award year 2019, but the rule itself states that borrowers with outstanding Direct Loan balances may “borrow loans made under this part for ANY PROGRAM of graduate or professional education through the close of September 30, 2024;”
I don’t see where it stipulates that that educational program must have begun before the 2019 aid year in order to continue receiving Direct loans.
With regards to losing Direct loan eligibility, It only says a “borrower described in paragraph (2) who borrows a loan made under part E for which the first disbursement is made on or after July 1, 2019, shall lose the borrower’s eligibility to borrow” Direct loans. But that doesn’t say that it’s MANDATORY to take One loans as opposed to Direct loans after 2019 for all borrowers, just that if a borrower with an outstanding balance does take a One loan after 2019, they’d lose their ability to take out further Direct loans. Will borrowers with outstanding balances be given a choice, though? I don’t see where it’s 100% clear.
It seems in Part E (which lays out One loans) like their could be a choice (it only says “made available”):
“There are hereby made available, in accordance with the provisions of this part, such sums as may be necessary to make loans to all eligible students (and the eligible parents of such students) in attendance at participating institutions of higher education selected by the Secretary to enable such students to pursue their courses of study at such institutions during the period beginning July 1, 2019.”
I couldn’t find anything anywhere that specifically says borrowers with outstanding balances will be REQUIRED to take out One loans instead of Direct for a program that starts after July 2019…
Also, it looks like it could technically be possible for students to get Direct loans after September 30, 2024 as long as the first disbursement was made before then:
“No sums may be expended after September 30, 2024, with respect to loans under this part for which the first disbursement is after such date.” Since loans are approved for the upcoming aid year in total usually, then maybe a student could get Direct loans through the end of aid year 2024-2025 (i.e. up to July 2025) as long as they’re approved and the first disbursement is made before October 1, 2024?
Thanks for any clarification you can provide. I know this is still a work in progress, but I’m trying to plan ahead in case it passes…
You make good points. It’s hard to say at this point to be honest. I would currently put the chances at this Prosper Act passing at around 30% in its current form, as Congressional Republicans have been stymied by their moderate wing and it looks like inertia might prevent any changes til after the midterm elections. By that time, we might have a more Democratic Congress and they’d seek to rewrite this bill.
Thanks for the reply, I agree that it’s very unlikely to pass as currently written, but it’s nice to know which parts to keep an eye on for changes so we can plan. I came across this article which says a little more about it, but still not 100% about whether a borrower with direct loans can start a new program after July 2019 and still receive direct loans until the 2024 (2025?) cutoff. It’s does say “borrowers who choose” to take a ONE loan… But no references posted
https://www.nasfaa.org/news-item/13898/PROSPER_Act_House_HEA_Reauthorization_Bill_s_Impact_on_Loan_Programs
My interpretation is that you would not be able to take out Direct loans in that scenario. After all, basically all undergrads entering grad school would qualify as a current borrower if they interpreted it that way, which would delay anyone taking ONE loans and feeling the lower caps until 2024, which wouldn’t make sense from what the bill’s authors are trying to achieve. That said, my best guess IF this thing passes is that it doesn’t get implemented til perhaps a year later than 2019.
Thank you for your article! I am graduating with my undergrad in May 2018 and plan to enroll in PSLF (I already work full time in a school district). I plan to enroll in grad school in either Spring or Fall of 2019. Would those loans (all of my loans are direct fed loans) apply to my current PSLF status? Or would they be separate? Would I qualify for PSLF for grad loans then?
The grad school loans would not be eligible if you enroll that late. You’d have two separate loans, the undergrad ones would be eligible for PSLF and the grad school ones would not be in this case as they’d be ONE loans.
How about if I start in Fall 2018 or Spring 2019? Would my loans become ONE loans after June 2019?
I’m hoping Travis will jump in and clarify this!
According to his previous advice in this comment section, as long as you start your graduate program before July 1st, 2019, you would be eligible for PSLF-eligible Direct loans (so you should be safe in your Spring 2019 or Fall 2018 start scenarios).
Hi sorry thanks Amy. Yes Danielle you should be ok if you start as late as spring 2019 because they have built the bill to allow for direct loan issuance through 2023 or 2024 to allow for the 2019 ppl to get through their programs. Things will be fluid til the final bill comes out, but initial results are promising.
I’m starting medical school in August 2018, and has a low-income student, my education is being financed entirely through loans. Mom and Dad cannot help unfortunately. Being a doctor is my dream, and loans won’t make me change my mind, but I’m also trying to be practical and understand everything before making such huge financial commitments.
Under the bill in its current form, will I be forced into the ONE loans for the 2019-2020 academic year? If I take out Direct in 2018-2019, then ONE in 19-20, would only the 18-19 loans be eligible for PAYE/REPAYE/PSLF? Or will I be able to use DIRECT until my anticipated 2022 graduation, and maintain access to those programs? What aggregate max will I operate under? (My medical school is PUBLIC, and I’m in-state, but COA is still 71k for only 2018-19…*sigh*)
Thanks for the help 🙂 It’s so frustrating that the federal government is toying with young people’s life plans and livelihoods with these changes…
You should be able to use the Direct loans throughout med school Lauren, at least with the latest proposed bill that I’ve heard about.
Hello,
Just want to shoot this out. Get some insight. I start law school in May 2019. I will be filling out all of my financial information prior to that and I am assuming the school would have me get approved for the Grad Plus loan prior to the school year (prior to the July 1 date). I am wondering how this could affect me. The school states that they disburse the Grad Plus loans in Fall and Spring semester so technically my first disbursement of Grad Plus would be after July 1. Would I essentially just have my loan cancelled on July 1 and have to switch to Federal One loan? I had to take little bit out on loan to pay for undergrad but not much so I already have a promissory note signed. However, my law school is quite a bit more than the new annual cap. Hoping I don’t have to take private loans.
It’s very up in the air right now. The bill has been stuck in committee far longer than anticipated as the Congress seems to want to wait until after midterms in 2018 to decide what to do. That probably helps you quite a bit as it preserves the status quo longer.
Thanks,
I viewed the bill and it says if you already have a direct loan for a graduate program prior to July 1, 2019 you can utilize direct loans to complete your graduate program until Sept. 2024. I will have a regular direct loan (not grad plus) towards this graduate in May 2019 so I think I’ll be fine. Grad Plus is considered a direct loan right?
Per your Feb 2019 update, the PROSPER act is currently dead. Our firstborn is starting college in Fall 2020 & the financial process is a bit overwhelming. Unfortunately she will be paying for college herself. She is waiting to see what scholarships she will be awarded before beginning the loan process. With the future of student loan debt forgiveness being so uncertain, what is the best way for her to move forward in hopes of qualifying for debt forgiveness?
Unfortunately take out as much as possible for grad school or pay as little as possible if for undergrad