Republican lawmakers in Congress are circulating a number of proposals to cut federal spending as part of a massive bill to extend and expand tax cuts. And student loan forgiveness programs and healthcare subsidies are squarely in the crosshairs.
President Trump and GOP congressional leadership hope to pass a large reconciliation bill in the coming months to extend or expand many provisions of the 2017 Tax Cuts and Jobs Act, which was enacted during Trump’s first term. The legislation reduced corporate, individual, and estate taxes, but many provisions are set to expire at the end of 2025. The cost of extending these tax cuts could exceed $5 trillion, according to the U.S. Department of Treasury’s Office of Tax Analysis.
Republican lawmakers on the House Budget Committee are circulating a memo, first reported by Politico, listing dozens of federal spending programs that could be eliminated to help offset the costs associated with extending the tax cuts. Among the many items that are being evaluated are several student loan forgiveness and relief programs, as well as healthcare spending. Here’s a breakdown.
Several Student Loan Forgiveness Programs Could Get Repealed
At the top of the list of federal student loan forgiveness programs that are targeted for repeal in the House Budget Committee’s memo is the SAVE plan. SAVE is a new income-driven repayment plan launched by the Biden administration in 2023 to lower borrowers’ payments and limit runaway interest accrual. The plan, like all IDR plans, would allow borrowers to eventually receive loan forgiveness, typically after 20 or 25 years in repayment.
The SAVE plan is currently blocked due to an ongoing legal challenge, but has not been struck down yet. The House Budget Committee proposes to fully repeal the SAVE plan, which GOP lawmakers would save $127.3 billion over 10 years. The proposal would replace the SAVE plan, as well as all other existing IDR plans, with a new income-driven repayment plan that would eliminate time-based student loan forgiveness.
The proposal would also repeal Biden-era regulations that expanded access to two other student loan forgiveness programs. This includes the Closed School Discharge program, which allows borrowers to request relief if their school closes while they are enrolled, and Borrower Defense to Repayment, which can discharge the student debt for borrowers who were misled or defrauded by their school. House lawmakers project nearly $15 billion in savings by limiting student loan forgiveness under these two programs.
The proposal would also limit the Education Department’s ability to draft regulations creating or expanding new student loan forgiveness initiatives, cap Pell Grants (which do not have to be repaid by borrowers), and limit eligibility for the Public Service Loan Forgiveness program (although the memo does not provide specifics).
Republican lawmakers are also looking at fully eliminating interest subsidies for federal student loans while borrowers are enrolled in school. Without such subsidies, by the time a student graduates from their degree program they could owe substantially more than the amount they originally borrowed. Lawmakers have steadily eliminated interest subsidies during the last two decades, and this would be one of the last major subsidies to repeal.
Healthcare Subsidies Also Targeted For Repeal
The House Budget Committee memo also includes a long list of healthcare reforms that would reduce access to healthcare and Affordable Care Act subsidies. Proposals include:
- Limiting healthcare access to U.S. citizens only. “Currently, many non-citizens who entered the country illegally are eligible for federal health care programs including advance premium tax credits and Medicaid,” says the memo. “This policy would remove specified categories of non-citizens from eligibility for federal health care programs,” saying an estimated $35 billion over 10 years.
- Eliminating healthcare subsidies for DACA recipients (also known as “dreamers”) — undocumented individuals who arrived to the U.S. as young children, often with their parents, and have lived here ever since.
- Limiting Affordable Care Act subsidies to only the “most needy Americans,” suggesting cuts to subsidies for those who may be lower income but above certain poverty guidelines. Lawmakers suggest this could save $5 billion over 10 years.
- Limiting federal matching funds for Medicaid payments to states.
- Eliminating the Prevention and Public Health Fund (PPHF), which has been billed as “the nation’s first mandatory funding stream dedicated to improving our nation’s public health system” under the Affordable Care Act. Republicans characterize the PPFH as “a slush fund for the HHS Secretary, who has full authority to spend funds in this account on any program or activity under the Public Health Service Act the Department chooses.” GOP lawmakers estimate that eliminating the PPHF would save approximately $15 billion over 10 years.
- Imposing work requirements on Medicaid recipients, which lawmakers project would save $100 billion over 10 years by effectively cutting enrollment in the nation’s largest healthcare program for low-income Americans. “The policy would restore the dignity of work by implementing work requirements for able-bodied adults without dependents to qualify for Medicaid coverage,” says the memo. “Certain populations would be exempted, such as pregnant women, primary caregivers of dependents, individuals with disabilities or health-related barriers to employment, and full-time students.”
What Comes Next For Potential Repeal Of Student Loan Forgiveness And Healthcare Subsidies
Advocates were critical of the the budget proposals.
“These dangerous cuts will cause chaos across the economy—causing monthly student loan payments to spike for millions of working families and making paying for college more expensive and risky.” said Student Borrower Protection Center Executive Director Mike Pierce in a statement on Friday. “On the heels of an election where the American people made it clear that they want policymakers to take action to bring down everyday costs—from eggs and gas to medical, credit card, and student debt—the MAGA movement is showing us who they really care about, and it’s not working people.”
So far, nothing has been finalized in the reconciliation bill, and the legislation is still in the early phases of development. But it is quite possible that at least some of the student loan forgiveness provisions and healthcare reforms will make it into the final bill, which lawmakers hope to pass within the first 100 days of Trump’s presidency. Passing the bill via the reconciliation process would allow Republican lawmakers to bypass the Senate filibuster, which normally would require Democratic support; but Republicans hold fairly narrow majorities in Congress, particularly in the House, so the final bill would require near-unified support from GOP lawmakers.
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