New Trump Budget Might End Student Loan Program
With the rising costs of higher education turning many Americans away from continuing their education, the country has offered more and more programs and benefits in recent decades to help. From Pell grants, to loan forgiveness and smaller percentage rates, the country’s budget has factored in the need to assist students in paying back their ever-growing debt
Amid Trump’s short but tumultuous presidency, there have been many concerns about his ideas on the country’s money and proposed budget cuts. He and his administration have recently released their budget proposal, and many people with student loans are rightfully nervous. His proposal involves cutting the budgets of many federally funded programs, but what are those cuts? And how will they affect student loan borrowers?
How the Programs Work Currently
The federal government has allocated money in the budget to forgive federal loan borrowers their debt it they make 10 years of on-time payments and work for an employer that is deemed to be serving to public good by the Department of Education, according to CNBC. These people could include local, state and federal government agency and nonprofit organization employers. Currently there are more than a half-million people who are certified to be receiving this benefit.
There are also multiple income-driven repayment plan options for student loan borrowers that allow these people to make easier payments based on what they’re making, instead of what their debt totals. Pell grants are also available to students, based on income. Students can receive up to $5,920 per year, which totals to about $4 billion being pulled from the federal program’s budget. Even other programs, such as the federal work-study program, the Federal Supplemental Education Opportunity Grant and the Child Care Access Means Parents in School programs help reduce student loans/debt.
What Trump’s Budget Proposal Means for These Programs
Trump is receiving a lot of criticism for his new proposals, especially since he made promises during his campaign to make college more affordable. According to The Washington Post, his new budget proposal “slashes discretionary funding for the Education Department by 13.5 percent and overall funding by 46.9 percent.”
His first proposal is to eliminate the subsidization of student loans. Instead of the government paying the interest of student loans while the student is still in college, he plans on increasing the flat 3.76 percent interest rate and removing the stay on interest gained during school. The budget also proposes to end the student loan forgiveness program for those entering public service. This means that the current program allowing forgiveness to those who are eligible will be completely eliminated.
In addition, there are proposals to cut the federal work-study program in half, which helps student work for their tuition while still in college; lessening their overall debt. Pell grants won’t take a hit under Trump’s new budget, but the Perkins loan program would be eliminated. Trump also seeks to eliminate the income-driven repayment plans that allow students to choose plans according to their income. Instead he wants to create a single plan that would make students responsible for paying 12.5 percent of their income, no matter what kind of income they make.
While President Trump is trying to cut money wherever he can, student loan borrowers may receive the brunt of his budget-cutting. With student tuition and debt always on the rise, it will become harder and harder for anyone to go to college and to pay for it afterwards if his budget is approved.