President Donald Trump is planning to make major changes on student loans in his 2020 budget. The new budget proposal includes about $64 billion in funding for the Department of Education. This is a 10% decrease compared to 2019 and is expected to have a significant impact on student loans and higher education. According to the proposal, the White House wants to reduce the role of the federal government in higher education. The government is also planning to “strike a balance” between students’ and taxpayers’ needs.
In order to achieve this, the president has proposed a number of things. First, the White House will end public service loan forgiveness. This is a federal program that was created by George W. Bush. It’s designed to forgive federal student loans for people who work full time jobs in the public service. But the proposal by the White House will affect students who take loans starting July 2020. In other words, people who have borrowed before that date could still be eligible for the public service forgiveness program.
So, what’s the potential impact of this move? First, some experts argue that the proposal would actually deter borrowers from entering public service jobs. This could adversely affect important institutions of the government such as the US Armed Forces, the police, firefighters, first responders, public defenders, prosecutors and others.
The 2020 budget proposal is also looking to change federal student repayment plans. The White House claims that there are too many income-driven loan repayments plans that are creating a lot of confusion. The income-driven plans allow borrowers to repay the loans based on their income, family size, and other factors. In some cases, employees who have large family sizes and a small income could qualify for forgiveness if they meet other criteria.
The White House wants to reduce the number of income-driven repayment plans. In fact, the president simply wants one plan in place. According to the proposal, the income-driven plan will affect both graduate and undergraduate students. For the undergraduate program, student loan repayments will be capped at 12.5% of the income. After 15 years of monthly loan repayments, the federal government will forgive the remaining amount. The current income-driven repayment plans require people to make monthly repayments for at least 20 years before the remaining amount is forgiven.
The graduate program also caps loan repayment at 12.5% of income. However, people will be eligible for forgiveness after 30 years of monthly repayment. The current plan requires employees to repay the loan monthly for 25 years to qualify for potential forgiveness. The Trump administration will also end subsidized student loans. There are concerns that this move will make the cost of attending college and graduate school even more expensive. It will also deter students from borrowing loans to fund their education in the future.
Nonetheless, it’s important to note that these are simply proposals. They still need Congressional approval before they are implemented. Congress may decide to review and repeal a few aspects of the proposal before it’s signed by the president. In that case, a lot could still change in the coming months.