The news today is frequently dominated by details of the newest healthcare bill – speculation regarding the future for consumers and providers alike. However, keeping up with changing health plans is not the only important challenge facing us as future dentists. The recent budget proposal outlined by President Trump, released in May, presents some significant changes to the student loan repayment programs. This will impact students’ ability not only to pursue a dental career, but also the ability to go into a specialty, enter public service or set up a practice. The budget proposal includes three main points regarding student loans:
- A consolidation of the multiple income-driven repayment plans to a single plan option
- A budget increase to the undergraduate Pell Grant programs
- A budget cut that will eliminate all subsidized loans as well as the Public Loan Forgiveness Program.[1]
While some of these changes will apply only to undergraduate students, there will also be changes that will affect current dental students’ capacity to pay loans back. In general, these changes appear to help undergraduate borrowers at the expense of graduate borrowers.
First, let’s focus on the changes to income driven repayment (IDR) plans. These plans set the monthly repayment amount at a percentage of the borrower’s discretionary income. This amount is calculated based on the difference between your income and either 100% or 150% of the federal poverty guideline, depending on the type of plan you choose. In other words, with these programs, you only have to make student loan payments in the amount of 10-15% of your discretionary income. Students make payments for a predetermined amount of time, 20 or 25 years depending on the program, after which point the remaining balance of the loan is forgiven. One key point is that any forgiven amount is added to your income in whichever year it’s forgiven and becomes taxable. While there are currently five different kinds of IDR plans, the budget proposal argues that having multiple plans “overly complicate[s] choosing and enrolling in the right plan.”[2] The budget proposes reducing the loan repayment plan choices to a single plan with payments of 12.5% of discretionary income (a 25% increase from the current plans). The new plan for undergraduate borrowers would result in their student loan debt being forgiven after 10 years of qualifying payments instead of the current 15. However, graduate students will need to continue to make payments for 30 years, an increase from the current 20 or 25. This is advantageous to undergraduate borrowers and deleterious to graduate students.[3]
There are several significant budget cuts that will affect dental students, including the elimination of subsidized loans. ASDA and the ADA have advocated for the expansion of subsidized student loans to include graduate student borrowers. With a subsidized loan, any accrued interest while the borrower is in school is paid by the government. While not currently available for dental school borrowers, ASDA has asked that these government subsidies be reinstated.[4] Instead, the proposed budget seeks to eliminate subsidized loans entirely (even for undergraduates).
The final and perhaps most controversial point is the elimination of the Public Service Loan Forgiveness (PSLF) program. This is a program that was created by President Bush in 2007 to encourage graduates to enter public service, despite large amounts of student debt. If a participant works at a qualifying location (e.g. rural or urban health care clinics, government, etc.) for 10 years while making the minimum payments on the loans, the remaining balance at the end of 10 years is forgiven. Unlike an IDR plan, this forgiven amount is tax-free.[5]
This fall season would be the first opportunity for some of the program’s 400,000 participants to see the benefits.[6] This program has allowed many medical professionals, including dentists, to work in underserved clinics by helping cut out a significant chunk of their student debt. However, opponents have argued that the PSLF encourages excessive borrowing and that it disproportionately rewards those who attend higher-cost institutions, which are traditionally attended more frequently by students from high-income families.[7] President Trump’s proposal itself states “these reforms will… focus assistance on needy undergraduate student borrowers instead of high-income, high-balance graduate borrowers.”[8] The ADA and ASDA have also advocated for the PSLF, including the program’s expansion as one of their main points in their March 24, 2017 coalition letter.[9] These requests have been rebuffed in the current proposal.
Although the budget proposal has been submitted, it still has a long way to go before it is approved, presenting many opportunities for change to occur. Currently, the bill has been submitted and is under review by Congress. On July 15th, Congress will present a revised bill to President Trump, who then has an opportunity to make a second round of edits. In September, the conference committee will meet in order to resolve differences that may exist between Congress and the President, resulting in the presentation of a final copy of the bill to President Trump. The President can veto or sign the bill, in which case, if signed, it will be enacted on October 1st, the start of the new fiscal year.
If you would like to get involved by sharing your thoughts on the budget proposal, we urge you to contact your congressional representative. ASDA Engage provides a quick method to lookup your elected officials or follow other important federal and state legislation. Visit ASDAnet.org/Engage today to get involved.
[1] Office of Management and Budget, Budget of the US Government: A New Foundation of American Greatness, Fiscal Year 2018, 13 May 2017.
[2] Ibid
[3] CNN Wire Service, “What is (and isn’t) in the budget for student borrowers.” Cable News Network, Inc, 26 May 2017
[4] American Dental Association, American Association of Oral and Maxillofacial Surgeons, American Student Dental Association, “Coalition letter urging the house Committee on Education and the Workforce to address several key issues in legislation to reauthorize the student loan provisions in the Higher Education Act of 1965.” 24 March 2017.
[5] Public Service Loan Forgiveness, Federal Student Aid, US Department of Education
[6] Mayotte, Betsy, “Trump Budget Proposals: Potential Impact for Student Borrowers.” US News, 24 May 2017.
[7] Akers, Beth. “It’s time to axe the student loan forgiveness for public service.” The Hill, 22 June 2017
[8] Office of Management and Budget, Budget of the US Government: A New Foundation of American Greatness, Fiscal Year 2018, 13 May 2017.
[9] American Dental Association, American Association of Oral and Maxillofacial Surgeons, American Student Dental Association, “Coalition letter” 24 March 2017.
ASDA: District 1 