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Washington Highlights

President’s Budget Proposes Graduate-Professional Student Aid Reforms

March 7, 2014—President Obama March 4 released his fiscal year (FY) 2015 budget, proposing significant changes to federal student aid and repayment programs under the Health Resources and Services Administration (HRSA) and the Department of Education.

Of interest to primary care physicians, the budget proposes to more than double funding for the National Health Service Corps (NHSC) with a $4 billion mandatory fund [see related article].  The NHSC provides scholarship and loan repayment awards to primary care clinicians in exchange for practicing in a federally designated underserved area. 

Starting in FY 2015, the HRSA congressional budget justification projects a field strength of 15,400 clinicians compared to 8,899 in FY 2013. The creation of the new mandatory fund for NHSC will hinge on congressional approval. 

Impacting graduate and professional student aid programs under the Department of Education, the president’s budget proposes:

  • Capping Public Service Loan Forgiveness (PSLF) at the aggregate loan limit for independent undergraduate students ($57,500);
  • Preventing payments made under non-income driven repayment plans from being applied toward PSLF;
  • Calculating payments for married borrowers filing separately on the combined household Adjusted Gross Income;
  • Eliminating the 10-year Standard monthly payment cap under Pay-As-You-Earn (PAYE);
  • Increasing from 20 years to 25 years the maximum repayment period under PAYE for borrowers with federal loan balances above $57,500 (e.g., graduate and professional students); and
  • Capping the amount of interest that can accrue when a borrower’s monthly payment is insufficient to cover interest costs. 

AAMC President and CEO Darrell G. Kirch, M.D., March 4 released a statement expressing gratitude for the NHSC investment, but disappointment “that the president proposes curtailing Pay-As-You-Earn and Public Service Loan Forgiveness in a way that disproportionately targets graduate and professional student borrowers.”

Dr. Kirch continues, “Medical students graduate and begin residency training with an average of $175,000 in student loan debt, and urgently need certainty in federal repayment and forgiveness programs in order to make career decisions.”

As in prior years’ budgets, the president proposes to reform the Perkins Loan and increase funding to $8.5 billion, a $7.5 billion (750 percent) increase over current levels.  Rather than operating through institutional revolving funds, the federal government would originate and service Perkins Loans. Perkins Loans would carry the same interest rate as unsubsidized Stafford Loans.

The president’s budget also requests $52 million in new spending on data collection to better inform the proposed Postsecondary Institution Ratings System (PIRS) [see Washington Highlights, Feb. 14] and $4 billion for a grant program aimed at encouraging states to maintain support for higher education, similar to the unfunded Race to the Top proposal in previous budgets.

In contrast to House Ways and Means Chair Dave Camp’s (R-Mich.) Feb. 26 tax reform proposal [see Washington Highlights, Feb. 28], the president proposes to exclude PAYE loan forgiveness from taxable income in addition to PSLF.  The budget also would make permanent the American Opportunity Tax Credit (AOTC).


Matthew Shick, JD
Director, Gov't Relations & Regulatory Affairs
Telephone: 202-862-6116


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