Since May last year, there is a constant threat looming over the education budget. The changes include eliminating the Public Service Loan Forgiveness Program (PSLF), clearing the interest deduction for student loans starting this year, taxing graduate tuition and removing the facilities for lifetime learning. All these programs offered stimulants for young professionals to work for the government, selected non-profits, remain in universities or enhance their knowledge.
Eliminating the PSLF is expected to affect a tremendous number of employees, as currently about 20% of the US workforce are engaged in jobs that fall under the provisions of the exemption, like teachers, nurses, and law enforcement. Even those belonging to the Peace Corps volunteers and the U.S. Armed Forces could be exempt up to 70% or 50% if they had Perkins loans.
If you too were hoping to take advantage of this program in 2018 or later, be sure to enroll your loans in the Direct Loan Program. If you have more than one credit, you could take a look at consolidating your loans first to take advantage of a lower interest rate. Also, be sure you have certified your employment status by getting a verification letter.
Other changes introduced by the bill include the removal of Lifetime Learning Credit, which offered a deduction up to $2000 which could have been used over the years when you continued to learn, including vocational training. This change is a severe hit for those looking to get experience in areas which are not part of university curriculum. It will also impact those looking to broaden their education through informal learning like personal development courses.
One program that was positively impacted by the Tax Cuts and Jobs Act is the American Opportunity Tax Credit. The first change is the granting period of five years period instead of four. Yet, on the last one, the deduction is up to only half of the initial $2,500. This facility is given to students enrolled in a recognized educational program who attended for at least half-time and don’t have drug convictions.
The two proposals that were not carried through included taxing the graduate tuition earnings who would have affected those working at their universities without having actual income and the interest deductions for student loans.
The long-term goal of this administration is to consolidate existing plans into an income-based repayment program. It has been said that the measures are a way to cut back on the costs to taxpayers, but in fact, these could affect more those who can barely afford education.
The worst part is that there is no clear indication of what will happen to those already enrolled in the PSLF program or currently going through the paperwork phase. It is expected that these borrowers will enjoy the benefits in their original form.
