The End of the Student Loan Forgiveness Program
So how many of you are trying diligently to get rid of your student debt? How many of you have simply given up at trying to ever get rid of that thing? Now, how many of you have decided to take advantage of the various government incentives that allow you to get rid of some, if not all of your student debt? If you’ve raised your hands to any of these questions, then Trump’s latest attempt at getting rid of student loan forgiveness may cause you to worry.
Trump’s 2020 budget is looking grim for middle and working class people. Student loans plague this country, and it’s been this way for decades. As of 2018, 42.2 million Americans owed $1.41 trillion in outstanding federal student loans. Students and former students in the U.S. have taken on loans for more then they can bare, just to simply get a regular career which very often doesn’t allow room to pay off student loan debt in a timely manner. With the 2020 Budget Proposal, paying off debt may become harder to accomplish in the future.
For 2020, there is a 10% decline in funding compared to 2019. One of the main goals for the budget is to, “strike a balance between students’ needs and taxpayer interests” and to “reduce student loan debt“; they are also looking to make higher education more affordable, and “reduce government role for the Federal government in education.”
Specifically, one proposal is to end the “Public Service Loan Foregiveness” program. This is a frequently used incentive created by George W. Bush that forgives federal student loans for borrowers who are employed full time in a state/local public service job or 501(c)(3), and who also make 120 eligible/timely payments over a 10 year period. This would only impact people borrowing money starting July 1, 2020; this does not include anyone eligible under and older loan. Yes this will save the Federal government money, however this will not save students. This could actually prevent students from going into any of these service-related fields.
The next proposal is to change the Federal Student Loan Repayment program. Instead of a varying array of income-driven repayment plans, Trump proposes one simple repayment plan, capped at 12.5% of your income. After 15 years of payments, any additional payment would be forgiven on undergrad and after 30 years of payments, graduate loans would be forgiven. This plan would reduce confusion on current loan choices. This choice would help undergrad students sooner, which could be a good thing if they are able to keep up with their payments.
Trump would also end Subsidized Student Loans. Subsidized loans are loans where the federal government pays the interest cost on federal student loans, while the student is enrolled in school. This will save the government a large sum of money. However, if they end the government subsidy program, costs to attend college will become more expensive because students will now be responsible for that interest.
How close are we to having this bill passed? No one can be sure, it us under review and will not automatically become a law. The President has proposed this bill, however only Congress can pass the bill, so stay tuned.
Source: Forbes
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