President Donald Trump (Photo by Sean Rayford/Getty Images)
President Trump has a new budget proposal that may affect your student loans.
Here’s what you need to know – and what to do about it.
Student Loans: New Proposals
Trump’s budget requests $66.6 billion for the U.S. Department of Education, which is a 7.8% decrease from current funding. The White House wants to rein in federal spending and shrink the size of the federal government. The budget, among other initiatives, includes several proposed changes that could impact your student loans and student loan repayment strategy:
1. Elimination of Subsidized Student Loans
The federal government no longer would pay the interest costs on federal student loans while borrowers are enrolled in school. This means that your interest costs for your federal student loans would be higher.
2. Elimination of Public Service Loan Forgiveness
The budget eliminates the Public Service Loan Forgiveness program. This student loan forgiveness forgives federal student loans for borrowers who are employed full-time with a qualified public service or a non-profit employer. Currently, borrowers in this program receive federal student loan forgiveness after 120 monthly payments.
3. Limits To Borrowing
The budget limits the annual and lifetime amount that parents and graduate students can borrow for school. This includes both Parent PLUS Loans and graduate PLUS Loans. Since PLUS Loans are relatively expensive, borrowers can still refinance student loans to lower their interest rate. Student loan refinancing rates dropped again this month to 1.89%.
4. Student Loan Repayment Change
Borrowers can still get student loan forgiveness through a single income-driven repayment plan. Under a simpler student loan repayment plan, undergraduate borrowers can pay off student loans faster and receive student loan forgiveness for their federal student loans after 15 years. Trump’s proposal would forgive the remaining student loan balance five to 10 years sooner than current income-driven repayment plans.
5. Other Proposals
The budget also expands eligibility for Pell Grants, supports the borrower defense rule, and provides discretionary funding for Historically Black Colleges and Universities (HBCUs). Unlike plans offered by Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (I-VT), there is no plan to cancel student loan debt.
Student Lon Debt Statistics
The latest student loan debt statistics show that 45 million Americans collectively owe $1.6 trillion of student loan debt. Today, student loan debt is the second highest category of consumer debt after mortgages, and the average student loan debt is about $29,200 per borrower.
If these proposals become implemented in whole or in part, make sure you have a student loan game plan. Where should you start? Start with these four options – all of which have no fees: