President Trump wants to end a popular student loan cancellation program.
Here’s what you need to know.
Ending student loan forgiveness
Trump’s new annual budget provides several changes to student loans, which are part of a $ 5.6 billion cut in funding to the US Department of Education. As in previous years, Trump reiterated his call to end the cancellation of public service loans. Under Trump’s proposed budget, if passed by Congress, the civil service loan forgiveness program would be eliminated.
the Public service loan remission is a federal program created in 2007 by President George W. Bush that waives federal student loans for borrowers who are employed full-time (more than 30 hours per week) in eligible federal, state or local public service employment or 501 (c) (3) non-profit job that makes 120 qualifying one-off payments over ten years.
Why Cancel the Public Service Student Loan Forgiveness?
President and Secretary of Education Betsy DeVos said they wanted to balance the needs of student loan borrowers and federal taxpayers. Eliminating this program, they argue, would save the federal government money without having to forgo billions of dollars in federal student loans. Others believe the program is essential in attracting and retaining individuals for access to public service and nonprofit jobs, many of whom pay lower wages than in the private sector. Supporters of the Public Service Loan Forgiveness program believe its removal could deter student loan borrowers from accessing public service jobs and could have a negative impact on public servants, including members of the US military, police, etc. firefighters, first responders, prosecutors, public defenders and others. Importantly, the proposal would impact future borrowers, not existing borrowers who already work in the public service and are currently paying off student loans.
“Cancel student loans”
This proposal to end this student loan cancellation program differs significantly from several presidential candidates, including Senator Bernie Sanders (I-VT) and Senator Elizabeth Warren, who have proposed plans to cancel student loans. Sanders wants cancel all $ 1.6 trillion in unpaid student loans, including federal and private student debt. Sanders’ student loan cancellation plan has no eligibility requirements; the 45 million student loan borrowers are eligible for release on their student loans.
Warren wants cancel student loan debt for over 95% of borrowers, and would write off student loan debt entirely for over 75% of Americans with student loan debt. Warren’s plan cancels $ 50,000 in student loan debt for every person with a household income less than $ 100,000 and forgives a substantial debt for every person with a family income between $ 100,000 and $ 250,000.
What Trump is proposing instead
Trump is not proposing to eliminate all student loan forgiveness. Instead, he proposes to end the civil service loan forgiveness program. Trump believes reducing the number of student loan repayment plans simplify the repayment of student loans and help borrowers pay off student loans faster. It’s important to note that federal student loan repayment plans can help you lower your monthly payment (even if interest is accruing on your balance), but don’t expect to get a lower interest rate on your student loans. Trump proposed an income-based repayment plan that would cancel federal student loans for undergraduate borrowers after 15 years of student loan repayment. Currently, you can receive federal student loan forgiveness after 20 years (undergraduate) or 25 years (graduate) under existing income-tested repayment plans. Like current income-focused repayment plans, borrowers under this proposed plan would likely be subject to income tax on the amount of student loan forgiveness they receive.
Your next steps
It is important to note that this proposal is part of an overall budget. Congress decides on federal spending and therefore decides whether to fund or reimburse a federal program. As Washington debates the future of your student loans, make sure you have a plan to pay off your student loans. Where to start ? Start with these four options, all free: