TRUMP STUDENT LOAN FORGIVENESS PLAN:
ALL YOU NEED TO KNOW
TRUMP STUDENT LOAN FORGIVENESS PLAN: ALL YOU NEED TO KNOW
Trump’s Plans To Make Student Loans Great Again
President-elect Donald Trump’s proposed plans for student loans signals good things on the horizon for millions of borrowers.
On October 13, Trump proposed alterations to the income-based repayment plans already in existence.
Under Trump’s plans, if you are a student loan borrower your monthly payments will be capped at 12.5% of your income. After 15 years of consecutive monthly payments your remaining principle and interest will be forgiven.
“Students should not be asked to pay more on the debt than they can afford,” said Trump during his Columbus, Ohio visit. “And the debt should not be an albatross around their necks for the rest of their lives.”
The Status Quo
Today, the standard federal government student loan repayment period is 10 years. For the borrowers who aren’t able to afford their monthly payments under the 10 year plan, the federal government created income-driven repayment plans to help make student loan payments more affordable.
Under the Pay As Your Earn (PAYE) and Revised Pay As You Earn (REPAYE), borrowers pay 10% of their discretionary income for 240 months (20 years). Under REPAYE if you have graduate loan debt, the repayment period is 25 years.
Trump plans to combine all the programs into one single plan to make it less confusing for borrowers. While Trump’s proposal raises the monthly payment cap from 10 % to 12.5% he cuts the repayment period by 5 years. He plans to pay for his new student loan plan by reducing federal spending overall.
Public Service and Teacher Loan Forgiveness
Those working as public servants or teachers who meet certain criteria, under the existing plans, are eligible for loan forgiveness after 120 consecutive monthly payments.
If Congress eliminated the Public Service Loan Forgiveness, and placed all borrowers under the same income-based repayment plan, existing borrowers in the PSLF program would be grandfathered in.
Other Potential Changes
Expect to see other student loan policies emerge from Trump’s nominee for Secretary of Education, Betsy DeVos as well as other congressional leaders. These changes may include:
1. Risk sharing between federal government and universities with respect to students who default on their student loans
2. Potential education of federal government’s role in student lending and a corresponding increase in the role of private lenders
3. Amount of “profit” the government generates from student loans, which may result in a reduction of interest rates for federal student loans
Top 5 Questions and Answers
1. Will I save more money on my student loans under Trump’s plan compared to Obama’s existing plan?
If Trump’s proposed plan doesn’t change and everything else remains equal, Trump’s plan will end up saving borrowers more money in the long run.
2. How do I apply for student loan forgiveness?
There are a few factors that determine your eligibility for loan forgiveness under the existing income-driven plans. To find out if an income-based repayment program is the best option for you we suggest you speak with a loan specialist. They will be able to take a look at your loans and determine the best route for you. If you’d like to learn more, give us a call at (800) 940-8911.
3. Does student loan forgiveness under Trump’s plan mean I will owe more money after the loan is forgiven?
Under both the Obama and Trump student loan forgiveness plans, borrowers who are not working the public sector are subject to taxation on their forgiven debt amount.
4. Will Trump’s plan lower my monthly student loan payment?
This depends on what you’re being asked to pay now and if you’re grandfathered into a income-based program already.
5. What are the benefits and risks to income-driven repayment plans?
Overall, the benefits of income-based repayment programs far outweigh the risks involved. These plans make it affordable for borrowers to pay back their student loans while not being forced into a financial hardship in the process.
Under the standard repayment program, 10 years in length, borrowers are asked to pay roughly 1% of their current student loan balance every month. If someone owes $50,000, their monthly payments will be around $500/month. This isn’t affordable for the average American which is why these programs exist.
The main benefit: you’ll save money upfront by getting a lower monthly payments which extends the repayment period to 15 years. You will be asked to pay 12.5% of your monthly income every month under the Trump loan forgiveness program.
The risk: you pay more interest over time because lower monthly payments means you are paying less on principal each month. However, the remaining principle and interest will be forgiven after you’ve made all consecutive payments in the program.
If you’d like to learn more and to see if you qualify for any of the forgiveness programs, give us a call at (800) 940-8911.
It only takes about 10 minutes to see if you qualify!
Call us at (800) 940-8911 or fill out the form on this page to speak to one of our representatives. It’s 100% free to see if you qualify for Obama’s student loan forgiveness, and only takes a few minutes.