How The Proposed Trump Budget Will Affect Student Loans

Total U.S. Student Debt is $1.4 trillion. Every second $2,858 of student loan debt is accrued. As of 2017, the average student debt amount is $37,172. These are the most up-to-date stats reported by Debt.org. Holey Moley! Someone should do something about this. Well, this week President Trump proposed what he envisions are some solutions. He is asking Congress to approve $9.2 billion in spending cuts to education for grades K-12 and higher education. These cuts will affect those who are current taking out student loans. If you are one of these students, here are some of the proposed changes that you should know.


One single repayment plan
Currently, there is a selection of different repayment plans for student loans. Trump’s plan has one. The goal is to streamline the entire process by capping monthly payments at 12.5% (currently 10%) of discretionary income. The loan balance for undergrads who make consistent payments will be forgiven after 15 years (currently 20 years) with graduate school debt forgiven after 30 years.

Planning to be a teacher, lawyer, or physician?
Loan forgiveness might not be an option. President George W Bush enacted the current public service loan forgiveness program. In the past, if a graduate remained employed by the government or a qualifying nonprofit the remainder of their loan would be forgiven after 10 years of service. Trump’s plan has proposed to end this opportunity for loans that originate after July 1, 2018.

The government will no longer pay loan interest while you are in school
The government currently offers subsidized loans to those in need of financial assistance. A borrower with a subsidized loan can rely on the government to pay the interest payments while the student is in school. Trump’s plan, if approved, will do away with subsidized loans.

More opportunities for Pell Grants
A Pell Grant is a subsidy the government provides for students. Note a grant is very different than a loan. A grant doesn’t need to be repaid. The proposed budget would extend the window during which students can apply for these grants by making them available year-round. They are currently only available in the spring and fall.