One major issue that will be taken up by presidential candidates is student loan reform. Senator Elizabeth Warren has proposed to simply forgive the $1.5 trillion owed by 42 million Americans – a suggestion certainly calculated to make her stand out from the crowd as well as incentivize votes. President Trump’s proposals come more from a position to take responsibility for what has been created.
Trump Budget: Student Loans
The White House released Trump’s 2020 budget proposal, which contains important implications for higher education and student loans. The budget includes $64.0 billion in funding for the U.S. Department of Education, a $7.1 billion, or 10%, decrease compared to the 2019 funding. The budget, as it relates to student loans, is built on several stated goals, among others:
- strike a balance between students’ needs and taxpayer interests
- ensure fiscal discipline in discretionary spending
- reduce the role for the federal government in education
- reduce student loan debt
- increase accountability for institutions of higher education
- make higher education more affordable
- invest in technical and career education
Here are some specific proposals, among others, which could affect your ability to pay off student loans faster:
1. End Public Service Loan Forgiveness
Under Trump’s proposed budget, the Public Service Loan Forgiveness program would be eliminated.
The Public Service Loan Forgiveness program is a federal program created by President George W. Bush that forgives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in an eligible federal, state or local public service job or 501(c)(3) nonprofit job who make 120 eligible on-time payments over ten years.
2. Change Federal Student Loan Repayment
According to the Trump administration, there are too many income-driven repayment plans for federal student loans, which causes confusion for student loan borrowers. Income-driven repayment plans such as PAYE and REPAYE enable borrowers to repay their federal student loans based on income, family size and other factors, and can result in student loan forgiveness.
3. End Subsidized Student Loans
The president’s budget also would eliminate subsidized student loans, which traditionally has meant that the federal government pays the interest costs on federal student loans while borrowers are enrolled in school.
Potential Rationale: Save the federal government money.
Potential Impact: The federal government would earn money by collecting additional interest. If subsidized loans are eliminated, the cost to attend college and graduate school for borrowers could become more expensive due to more interest costs.