The FY2019 federal budget proposes to end public service loan forgiveness because it will cost more than expected. Although only about $30 million will be forgiven in FY2018, the annual cost will exceed $5 billion in FY2021.
To cut costs, the budget substitutes an income-driven repayment plan that will forgive the remaining debt after 15 years for undergraduate students and 30 years for graduate students. This doubles and quadruples the cost to borrowers seeking forgiveness.
Congress should consider other possible solutions, such as up-front loan forgiveness, reasonable loan limits to prevent moral hazard and means testing of forgiveness.