Donald Trump’s Plan for Student Loans (And What He’s Done So Far)

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June 9, 2020

Last fall, Democratic proposals for dealing with the student debt crisis were highlighted throughout the debates. Presidential candidates talked about student loan forgiveness, changes to income-driven repayment plans and ending wage garnishment

President Donald Trump has also made changes to student loans, including pausing federal student loan payments because of COVID-19. Trump also has proposed many changes, including reforming income-driven repayment and eliminating the Public Service Loan Forgiveness program. 

What Trump Has Done So Far

The Trump Administration implemented the year-round distribution of Federal Pell Grants, instead of limiting these grants to the spring and fall semesters.

Trump allowed federal student loan borrowers to temporarily suspend payments with no interest accruing due to the economic impacts of the coronavirus pandemic. 

The Tax Cuts and Jobs Act in 2017 made death and disability discharge for student loans tax-free from January 1, 2018 to December 31, 2025. 

Trump signed the SECURE Act, which expanded the benefits of 529 college savings plans by adding student loan payments and cost of apprenticeship programs as qualified expenses.

The U.S. Department of Education has released an app version of the Free Application for Federal Student Aid (FAFSA). 

The U.S. Department of Education provided $359.8 million in federal assistance to 20 states and the U.S. Virgin Islands to assist with the cost of educating students displaced by Hurricane Harvey, Irma, Maria, or the 2017 California wildfires.

The Trump Administration has issued regulations to limit the amount of student loan forgiveness available to defrauded borrowers who file a defense to repayment claim.  

Trump’s Proposals for Student Loans

Trump proposes to combine all income-driven repayment plans into one plan, instead of the current four different plans. The hope is that it would make the process of income-based repayments easier. 

Under this proposal, monthly payments for income-driven repayment would be 12.5% of a borrower’s discretionary income. Currently, monthly payments are 10, 15 or 20% of your discretionary income, depending on the specific plan you’re enrolled in. 

Undergraduate borrowers enrolled in income-driven repayment would be eligible to receive student loan forgiveness after 15 years, instead of 20 or 25 years. Borrowers with graduate student loans would receive forgiveness after 30 years. 

Monthly payments would not be capped under Trump’s income-driven repayment plan, increasing without limits as the borrower’s income increases. In addition, the loan payments for married borrowers would be based on the joint income of the borrower and spouse, even if they filed separate federal income tax returns. 

President Trump has repeatedly called for the repeal of Public Service Loan Forgiveness. Such a repeal would have to pass both the U.S. House of Representatives and the U.S. Senate, which is unlikely. 

As part of the 2021 budget, Trump proposes to eliminate subsidized student loans. Currently, the federal government pays the interest on subsidized student loans during the in-school and grace periods, as well as during authorized deferments.

Also part of the 2021 budget, Trump proposes to limit the amount of Parent PLUS Loans and Grad PLUS Loans. 

The FY 2021 budget request also dramatically increases funding for Career and Technical Education (CTE) programs by $900 million.

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