What Trump's proposed budget cuts could mean for college savers

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The newly released 2018 federal budget proposal has many parents concerned about it's potential impact on higher education. It's hard to ignore the headlines when words like "slashing", "cruel" and "an assault on the American Dream", are being used to describe suggested cuts to the Education Department. Adding to the jitters, the very next day after the budget was released, James Runcie, chief operating officer of the Education Department's Office of Federal Student Aid resigned from his position, because he wasn't happy with the way Betsy DeVos has been running the Department of Education, says the Washington Post.

But are these fears warranted? This is, after all, just a proposal and is unlikely to be approved by Congress in its entirety. Yet it does reflect the current priorities of the White House, and reflects campaign promises made by President Trump.

Here's a quick summary of what college savers should know about the main proposals targeting the Department of Education:

Proposal #1: Eliminate subsidized loans

In an effort to improve the country's fiscal health, the budget proposes to end programs where the government pays the interest on federal loans for low-income students while they are currently in school, up to six months post-graduation and their first deferment period. It would also eliminate subsidized Stafford loans, where the government covers the interest during the first three years of an income-driven repayment plan.

What this means for you:

Student loans will become more expensive, especially for lower-income families. The best course of action for parents is to start putting money away as soon as possible, to help bridge any future savings gap. You may also want to consider cost-cutting strategies such as having your child attend community college for the first two years, and/or working a part-time job to help contribute. There are also ways to gain college credit while in high school, such as dual enrollment or the College Level Examination Program (CLEP).

RELATED: Opinion: Betsy DeVos is a bad bet for education

Proposal #2: Simplify income-driven repayment plans

Both parties agree that the current options for income-based repayment plans are confusing, and could use some TLC. Right now there are a handful of different options available, none of which are easy to sign up for or understand. Today, depending on which program they qualify for, students can reduce their loan repayment to as little as 10 percent of their income for 20 years and then have the remainder of the debt forgiven. The 2018 budget proposes cutting down to one repayment plan, where borrowers would have to pay back no more than 12.5 percent of their income for 15 years (30 years for graduate students).

What this means for you:

This proposal also eliminates the Public Service Loan Forgiveness Program (PSLF), which helps those who work for nonprofits or for the government. Borrowing will become less attractive for students planning to pursue careers in fields such as teaching, social work and public defense. Jobs in these fields tend to pay relatively low salaries that may make it difficult to keep up with loan repayments, so students should pay close attention to tuition prices when deciding on a school. They can also start building a scholarship resume, by getting involved in a variety of sports, extracurricular activities and volunteer opportunities.

Proposal #3: Expand Federal Pell Grant program

Federal Pell Grants are offered to undergraduate students with financial need who have not yet earned a degree. They do not need to be paid back, and students can use Pell Grant to pay for two semesters per year. The White House proposal recommends increasing this type of aid by $1.5 billion in 2018, and allowing qualified students to be able to use the Grants year-round.

What this means for you:

By adding a third semester of Pell Grant aid, college students who qualify will be able to graduate faster and in some cases, with a smaller loan balance. This creates an incentive for more lower-income students to pursue degrees. However, the White House also proposes cutting funding for federal-work study program by almost half. While a work-study paycheck typically won't be enough to cover larger costs like tuition and room and board, it can provide students with money for food and other living expenses. Lower-income families who will qualify for tuition grants should focus on saving with a 529 plan, even a small amount, to cover these costs.

RELATED: 4 ways families are tackling high college costs