Trump Proposes Changes to Student Loan System
posted by Dominque Elliott | April 24, 2019 | In News“We need to modernize our higher education system to make it more affordable, flexible and outcome-oriented, so all Americans, young and old, can learn the skills they need to secure and retain good-paying jobs,” Ivanka Trump said at the National Conference of American Workers before unveiling the new Trump administration student loan policies.
According to CNBC, on March 6, the Trump administration proposed a student loan program that would reduce the number of federal loan repayment options and cap the amount of student loans that parents or graduate students can have.
The first part of the Trump Administration’s proposal is reducing the number of student repayment options. The Standard Repayment Plan, the Graduated Repayment Plan, the Extended Repayment Plan, the Revised Pay As You Earn Repayment Plan (REPAYE), the Pay As You Earn Repayment Plan (PAYE), the Income-Based Repayment Plan (IBR), the Income-Contingent Repayment Plan (ICR), and the IncomeSensitive Repayment Plan would all be reduced to two programs.
According to CNBC, “consolidating repayment options so that the government would offer just two plans: one standard 10-year fixed plan and one income-driven repayment plan. The latter would limit monthly payments to 12.5 percent of a borrower’s discretionary income and offer loan forgiveness after 15 years.” Originally, borrowers paid 10% of their discretionary income.
There are both pros and cons to this. A pro may be having more people on income-based repayment options, and less people choosing plans that they’re not really sure about the details that are entailed. Therefore, making the repayment process simpler. A con is that these plans may not allow students to consistently be in them long-term, due to a repetitive annual enrollment. The positives or negatives of these changes also depend on whether a student is undergraduate or a graduate.
According to student debt relief, “Undergraduate students would have their loans forgiven after 15 years of monthly payments and graduate students would have their loans forgiven after 30 years of monthly payments. Basically, undergraduate student loans would be forgiven five years sooner than the current plans and graduate student loans would be forgiven five years later.”
The second part of the Trump Administration proposal focuses of capping student loans. There wasn’t any mention of how much undergraduate and graduate students may be capped though.
According to the PLUS Loans program, undergraduate students can only borrow $57,500, and graduate students can borrow in aggregate $138,500 currently. If the new student loan cap decreases these numbers, it could have negative implications on students who need financial assistance.
The Trump administration also eliminates public loan forgiveness. Student Debt Relief reports, “In the proposed 2020 budget, President Trump eliminates the Public Service Loan Forgiveness program. Presumably, students who borrow or have borrowed student loans prior to July 1, 2020 would still remain eligible for PSLF. Borrowers who take out a new federal student loan starting July 1, 2020 would not be eligible for the PSLF. If this part of the budget passes, it’s estimated to save the federal government a lot of money.”
“I don’t believe in taking away programs,” Staisha Cain, a political science major, commented. ”I understand making changes, but don’t take away loan forgiveness.”
“I understand that removing the loan forgiveness would save the government money,” Bristol McLean, a visual arts major, noted, “But he’s going to increase the amount of people in debt. As someone who is considering going into education, I was also relying on the loan forgiveness program. I’d rather stay away from the career, as I don’t feel like I’ll be able to pay off my loans off salary alone.”
Subsidized loans may also be eliminated, which means most students will have unsubsidized loans or loans that accrue interest. Also, the proposal doesn’t seem to address the problem of school and colleges that are continually increasing their tuitions each year.
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