The Trump administration has just released it full spending proposals, which detail the president’s proposals for the higher education budget, including federal student aid.
Although these proposals could have implications for student loan borrowers, it’s important to emphasize that they are currently only suggestions. When drafting various appropriations bills, Congress will take Trump’s proposals into consideration, along with those from various committees and members and the Office of Management and Budget.
[See three student loan reforms to expect under Trump.]
In the end, Congress could decide to take all of these suggestions, which is very unlikely, or some or none of them, both of which are possible. It could also decide to put them aside for now, with the intention of looking at them again as part of the process of reauthorizing the Higher Education Act of 1965.
It’s way too early to be worried or excited about these. But it’s never too early to understand what could be coming. Let’s look at Trump’s higher-education-related budget proposals.
— Eliminating public service loan forgiveness: The one proposal that is giving both advocates and borrowers the most pause is elimination of the Public Service Loan Forgiveness program.
This program, which forgives the balance of some federal student loans after the borrower has made 120 eligible payments while working for a qualified public service employer, was created to encourage students to enter into and remain in careers such as teaching, government, social work and public law. The program was enacted into law in 2007, and the first borrowers will be able to apply for forgiveness this fall.
An estimated 33 million employees work for eligible employers in the U.S., according to the Jobs with Justice Education Fund, but only about 500,000 borrowers are pursuing the program, according to the Department of Education. The Department of Education has received criticism for what is seen as a lack of communication to eligible borrowers about this program’s availability.
On the flip side, the program itself has been criticized for being expensive and redirecting aid to those with higher incomes rather than those who might need money to achieve higher education in the first place.
[Don’t panic about forgiveness eligibility.]
T he Student Loan Ranger thinks the program will likely change but not be eliminated altogether. With the Consumer Financial Protection Bureau estimating that the U. S. will see a shortage in some of the very fields the program is meant to serve, eliminating the program, especially without also addressing the high cost of college, would be a difficult decision for Congress to defend in the 2018 elections.
Instead, we predict that the forgiveness amount will be capped for new borrowers at the current undergraduate loan limit of $57,500 and that the definition of eligible employer may see some additional restrictions. We ‘re confident that any changes to the program will affect new borrowers only, likely those who take out their first loan on or after the day any such law goes into effect.
In fact, the official budget that was released this week specifically dictates the effective date, as follows: “All student loan proposals apply to loans originated on or after July 1, 2018, except those provided to borrowers to finish their current course of study.” So the proposed changes to PSLF would not affect existing loans.
— Eliminating income-driven repayment plans: Trump’s proposed budget also includes eliminating the multiple income-driven repayment plans and introducing a single plan that would forgive the balance of all eligible borrowers’ loans after 15 years of payments made at 12.5 percent of their discretionary income. Borrowers with graduate debt would see forgiveness after 30 years.
Existing plans forgive the balance of eligible loans after 20 or 25 years of payments at 10 or 15 percent of the borrower’s income, depending on the plan. The current administration mentioned this repayment option during the presidential campaign, so it’s no surprise that it appeared in the budget proposal.
[Follow steps to stay on top of an income-driven repayment plan.]
— Pell grant maximums: Other changes include keeping Pell grant maximum awards at $5,920 and pulling almost $4 billion from the program’s reserve funds. This could mean higher debt for lower-income students if tuition continues to increase, since these awards remain flat under this proposal. On the other hand, they also propose allowing year-round Pell grants, which could mean less debt for those who choose to take summer courses.
— Additional student debt-related changes: There are suggested cuts to other aid programs that can help reduce a student’s overall debt level, including the federal work-study program. The proposed budget also eliminates the Federal Supplemental Educational Opportunity Grant and the Child Care Access Means Parents in School, which helps low-income parents access on-campus day care programs.
The f ederal Perkins loan program w ould be allowed to expire and subsidized Stafford loans, for undergraduate students, would be jettisoned. The Student Loan Ranger feels that these proposals stand a much better chance of being pushed forward, because they reflect the desire of Sen . Lamar Alexander , R-TN — the current chair man of the Senate Committee on Health, Education, Labor and Pensions — to consolidate federal aid programs in to a ” one grant, one loan” program.
More from U.S. News
6-Month Plan to Prepare for Student Loan Repayment
Want Less College Debt? Graduate Sooner
New Fannie Mae Rules Help Home Buyers, Owners
Trump Budget Proposals: Potential Impact for Student Loan Borrowers originally appeared on usnews.com
