What Does Trump’s Presidency Mean For Student Loan Borrowers?
Many student loan borrowers are wondering how Donald Trump’s plans for dealing with the student loan crisis will affect them going forward.
In addition, many are also wondering how his choice for Secretary of Education, Betsy DeVos, will want to handle federal student loans in the future. While being an outspoken advocate in many areas of education, she has yet to address the particular issue of student loans.
Both of these are important questions to which may finally be getting early answers. . . and those answers are scary for a huge number of student loan borrowers. Reports as of May 2017 are that Trump and DeVos’ initial education budget will seek to eliminate the Public Service Loan Forgiveness program which could cost student loan borrowers billions of dollars! Further Trump and DeVos will likely seek to eliminate over $700 million in Perkins Loans and massively reduce work-study programs.
If Trump/DeVos may take Public Service Loan Forgiveness away, what should borrowers do?
- For borrowers that are eligible for PSLF immediately ensure you loans in the Direct Loan Program (consolidate your loans as necessary)
- If you’re in the Direct program already and eligible for PSLF, immediately certify your employment
Theses steps alone will not ensure that borrowers will receive PSLF, but being in the program prior to any law changes is likely to improve your chances of receiving it greatly.
Based on what Trump has said so far, here are his other most concrete views:
(Please note: NONE OF THIS IS LAW YET. There is no program with the name “Trump Student Loan Forgiveness,” we are simply keeping readers up-to-date on Trump’s latest views on student loan forgiveness.)
- Consolidate ALL current repayment plans into a single Income-Based Repayment program (IBR) where students pay 12.5% of their income toward their loans each month and receive total loan forgiveness after 15 years
- Plans to cover increased forgiveness amounts (and the higher cost to taxpayers) due to shorter repayment terms by lowering federal spending accordingly
- Promises to scale back funding significantly for the Department of Education
Here are the other, less fully-defined stances he has taken:
- He has stated that the Government “shouldn’t be making money on student loans”—the logical/only fix to this would be to lower the interest rate for federal loans going forward
- He has made vague suggestions that he wants to get rid of the Public Service Loan Forgiveness program (in favor of putting all borrowers into a single IBR)
- Will push colleges to cut tuition by reducing large administrative costs
- Will reduce federal regulations on colleges to reduce their compliance costs so they can pass those savings along to students
- Universities will be required to spend all of their endowment money going forward on their students (instead of “hedge fund managers”) to keep tuition low and cut student debt or risk losing their federal tax breaks
- Threatened possible tax-exempt status for large university endowments if schools don’t start making their degrees more affordable for students
How could Trump’s student loan forgiveness ideas impact borrowers?
- If he does change the IDR program as he has suggested, those interested in Income-Driven Repayment plans would have a higher monthly payment, BUT forgiveness would occur sooner.
Here are the big outstanding questions:
- No mention of tax implications on forgiven student loan amounts
- No mention of bankruptcy reforms
Again, we don’t have an official plan yet, but those are the details we have to work with at this point.
So how will this affect your student loans going forward?
And more importantly, what should you do about it?
Here are a few of our recommendations based on what we know at this point:
1) Trump is clearly in favor of a single IBR program going forward, and one with a shorter forgiveness period than the current version. If you’re currently in distress or default on your loans, enroll in a current Income-Driven Repayment program (or a loan rehabilitation). If you’re not, it may be best to wait and see what develops with Trump’s stated new version before you enroll. The shorter forgiveness period may end up saving you money over the long-term.
2) Make sure to stay current on your student loans payments and out of default status. This is important because, in the past, new student loan programs have been more difficult for those in default to enroll in. Keeping your loans in good standing is the best way to keep your opinions open going forward.
3) At this point, we have no real knowledge about how Trump’s student loan policies will affect private loans, if at all. This being the case, our best advice right now is simply to wait and see what develops. This may offer the opportunity to take advantage of better options in the near future.
We understand that there are still a lot of questions in the minds of student loan borrowers about how Trump’s future policies will affect them. Rest assured that as things develop, we will provide you with the most up-to-date information and guidance we can as quickly as possible.
Here are the most common questions we’re getting asked by readers:
Will Trump forgive my student loans?
While we can’t know for sure, it seems very likely whatever program he implements will have end of term loan forgiveness as a component. His most recent thinking is forgiveness would be after 15 years of payments.
How do I get student loan forgiveness?
Make sure your federal loans are enrolled in the direct loan program. If they are not, consolidate them into the direct loan program. If they are Stafford loans you may want to see if you qualify for any of the Stafford forgiveness programs. Here is a complete guide to student loan forgiveness.
Will Trump lower my student loan payment?
You likely don’t need to wait for Trump to lower your payment, you may be able to lower your payment today. Look at Income Driven Repayment programs and/or private loan consolidations today. Based on his statements so far it is likely he will continue the Income-Driven Repayment program that helps borrowers lower their payment to a manageable size.
Will Trump lower my student loan interest rate?
So far he has not made any definitive statements regarding interest rates, but he has said the Department of Education shouldn’t profit from student loans. One way to make sure they are not profiting would be to lower the interest rate.
Will Trump do away with the Public Service Loan Forgiveness?
He has not stated this directly. However, he has said that he wants to roll all current federal student loan programs into a single Income-Based Repayment program. One can only assume that this would include the Public Service Loan Forgiveness program as well, but this is by no means certain.
Trump’s cancellation of Obama Student Loan Protections may actually grow the federal government’s involvement in student loans
Under the Trump administration, the Department Of Education has removed Obama era protections for student loan borrowers who want to rehabilitate their loans.
By making rehabilitation of privately held loans less attractive, borrowers are more likely to opt to skip rehabilitation and immediately consolidate their FFEL loans into the Federal Direct Loan Program to take advantage of income based re-payment programs. When borrowers take this action, it moves loans from private balance sheets to the federal governments.
Stay tuned as things are almost certainly going to get interesting and we’ll keep you posted!
To understand your options and get free help you can call your loan servicer or visit the Department of Education’s website. If you’d like to talk to a company that specializes in helping people navigate and take advantage of the benefits of current student loan programs, call +1-844-669-4407 (this will connect to a 3rd party company that assists federal student loan borrowers).