5 Ways President Trump may Complicate Student Loan Forgiveness

It’s no secret that millions of Americans are drowning in student loan debt, and those same people were hopeful that the 2016 presidential election would bring some relief. While both candidates made promises to ease the burden on student loan borrowers, Donald Trump’s plans were certainly more vague, and his actions since getting elected have left many worried that they may face even greater struggles in repaying their debt.

Here is a closer look at the comments President Trump made during his campaign:

Trump wanted to scrap the current income-based repayment plan and implement his own plan.

Prior to being elected, Mr. Trump gave a speech in Columbus Ohio where he told the audience that “students should not be asked to pay more on their loans than they can afford.” His solution was to consolidate the current repayment plans into one income-based repayment plan, which would make it less complicated for borrowers.

His plan would cap payments at 12.5% of a borrower’s income and loans could be forgiven after 15 years. The current plan caps payments at as little as 10% of a borrower’s income, but loans aren’t forgiven for 20 to 25 years. However, people eligible for Public Service Loan Forgiveness may have their loans forgiven in as little as 10 years under the current plan.

Trump considers privatizing student loans.

In May 2016, Sam Clovis, the national co-chair and policy director for Trump’s campaign, told Inside Higher Ed that Trump wants the federal government out of the student loan business entirely. During the interview, he mentioned that “we think it should be marketplace and market driven.”

He went on to say that local banks should be the ones lending to local students. This change could make it hard for low-income students to qualify for loans and therefore college could be out of their reach.

Trump’s campaign also believed that colleges should have a role in determining loan worthiness. Clovis explained that this would push colleges to refuse admittance to students unless they were confident that those students could graduate in a reasonable time and find employment. This plan could, for example, impact students who want to select certain majors such as liberal arts because a liberal arts degree might be less likely to help a graduate land a job. Using the same logic, should tuition and fees for a liberal arts degree cost less than for an engineering or business degree?

Trump wanted to stop the federal government from profiting off student loans.

During his campaign, Mr. Trump criticized the fact that the federal government profits off student loans. He went on to say, “that’s probably one of the only things the government shouldn’t make money off — I think it’s terrible that one of the only profit centers we have is student loans.” This could be behind Trump’s push to privatize student loan borrowing.

He also wants to pressure colleges to cut tuition costs. During his inauguration speech, Trump complained that schools are “flush with cash.” While campaigning, Trump said that if the federal government is subsidizing student loans then colleges must be held accountable to make sure they invest in their students. He went on to explain his idea that college endowments could lose their tax-exempt status if they don’t use endowment money to lower costs.

President Trump’s actions so far seem to contradict his promises.

As most candidates running for president, Trump made many appealing promises, but since being elected his actions are making student loan borrowers nervous.  As student loan defaults continue to rise, President Trump’s administration recently took steps to revoke federal guidance, which had barred student debt collectors from charging high fees on past-due loans. Rohit Chopra, a senior fellow at CFA and a former student loan watchdog at the Consumer Financial Protection Bureau, told the Washington Post Trump’s administrations “first move on the student loan default crisis will do nothing to stop the tidal wave of defaults that is sweeping across the nation.”

Will President Trump change the rules for Student Loan Forgiveness?

Trump’s administration also seems to be going after the federal student loan forgiveness program. Currently borrowers who take certain public service jobs (vs more lucrative private sector jobs) might be eligible to have their student loans forgiven after working for 10 years. Borrowers could previously submit a certification letter to FedLoan in order to verify if their employment qualified for loan forgiveness. Now the Department of Education is saying that borrowers cannot rely on FedLoan to determine if they qualify for student loan forgiveness, and that the approval letters, which have already been sent to thousands of borrowers, are not legally binding. This could potentially impact over half a million borrowers who are already participating in the public service loan forgiveness program.

While President Trump’s initial comments on student loans may have seemed hopeful, he has yet to enact any major changes that could relieve the debt burden placed on so many Americans. In fact, the actions taken by his administration so far appear to hurt borrowers rather than help. It’s true that Trump’s presidency is still new so time will truly tell if he follows through on his campaign promises.

2 replies

Comments are closed.