The Trump Administration released its proposed 2018 budget, and inside the gargantuan document, we found details of the Trump student loan plan.
Mind you, this is a proposal right now, and all of Trump’s bold budgetary vision for America is subject to congressional approval. In the meantime, here are all the gory details on what the new administration is envisioning.
Also note that the proposal applies “to loans originated on or after July 1, 2018, except those provided to borrowers to finish their current course of study.”
Income-driven payments are here to stay
Trump would like to see student loan programs reformed and simplified. The popular income-driven repayment plans (IDR), which caps payments to a certain percentage of your income, would be consolidated into one universal IDR plan. After a certain number of years, your loans are entirely forgiven, but you still have to pay taxes on the amount forgiven (which makes for a huge tax bill).
The amount you pay under IDR would be increased from 10 percent to 12.5 percent under this plan. Forgiveness would come much quicker for undergraduates, as their remaining balances would be forgiven after 15 years of repayment. For graduate borrowers, they would have to wait 30 years for their balances to be wiped out. Right now, loan balances are typically forgiven after 25 years.
So long Public Service Loan Forgiveness
The plan calls for the complete elimination of the popular Public Service Loan Forgiveness Program (PSLF). That programs allows people to have their loans forgiven after 10 years of continuous payments, even if they’re signed up for IDR. To be eligible for PSLF, you have to make those 120 payments while working full-time for government or nonprofit organizations.
For those who are already enrolled in the program, there’s no word yet on how their fate will be decided in light of this major policy change.
The budget proposes that students have access to Pell Grants year-round in order to wrap up their undergraduate studies faster.
Pell Grants are a popular program that help needy students pay their college tuition, and this expansion would help fund summer school.
But no more subsidies
The budget proposal gets rid of subsidized loans all together, which means interest rates will likely be higher for many borrowers. The proposal seeks to “reduce inefficiencies in the student loan program,” while allocating more resources to help needy undergraduates.
The language in the proposal suggests that graduate borrowers, who often end up making good salaries after completing their professional degree programs, are currently receiving too much help.
Student loans that financed graduate and professional degrees are estimated to make up approximately 40 percent of the outstanding student debt in America.
Takeaway: It’s not set in stone yet
Upon first look, it would appear that graduate students would end up paying more than they do now. For undergraduates, the impact will largely depend on the individual borrower’s aid package.
For all borrowers, the proposed simplified system will be easier to navigate. But as mentioned, this is all a proposal that will likely meet a lot of resistance in Congress.
Sen. Lamar Alexander, R-Tenn., when asked by the Washington Post to react to the budget proposal, reminded the public that the president can suggest what he wants, but “under the Constitution, Congress passes appropriations bills.”
That’s a clear reminder that while the Trump administration has grandiose plans, they are subject to the whims of a divided Congress.
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