When it comes to your student loans, here is President Donald Trump’s position on student loan cancellation.
Here’s what you need to know.
Many changes have been made to your student loans this year. Trump actively used executive action, with support from Congress, to provide financial relief to student loan borrowers as a result of Covid-19. For example, as part of Trump’s latest executive action through a memorandum to US Secretary of Education Betsy DeVos, Trump:
Trump extended this student loan relief until December 31, 2020, which means that these student loan benefits lasted the vast majority of 2020. It is clear that Trump supported forbearance of student loans and the forgiveness of interest. Despite this relief on student loans, there was a policy that was not included: the cancellation of student loans. What is Trump’s position on student loan cancellation? Here are some points of view:
End the student loan forgiveness program
Trump would end the civil service loan forgiveness program. As part of Trump’s proposed budget, the civil service loan forgiveness program would be phased out. The Public Service Loan Forgiveness Program is a federal program that waives federal student loans for borrowers who work full-time in a qualified public service or non-profit employer. The proposal would impact future borrowers, not existing borrowers who already work in the public service and are currently paying off student loans. Why cancel a student loan forgiveness? Trump and DeVos want balancing the needs of student loan borrowers and federal taxpayers. Eliminating this program, they argue, would save the federal government money without potentially having to write off billions of dollars in federal student loan debt. Trump too vetoed student loan cancellation law keep the borrower defense rule, which would help borrowers cancel their student loan debt if they were the victims of fraud.
Simplify student loan repayment plans
Mostly, Trump does not propose to eliminate all student loan forgiveness. On the contrary, he specifically proposes to end the civil service loan forgiveness program. Does Trump support canceling student loans? Yes, and it supports student loan cancellation through income-based repayment plans. However, Trump would cut the number of student loan repayment plans to just a map to simplify student loan repayments and help borrowers pay off student loans faster.
Give up undergraduate student loans faster
Under Trump’s proposal, you could repay federal undergraduate student loans as part of an income-based repayment plan that would offer a student loan forgiveness after 15 years of student loan repayment. Right now, you can qualify for a federal student loan waiver for undergraduate student loans after 20 years, which means you could receive a student loan waiver five years earlier. In exchange for receiving five years less monthly student loan payments, you would pay 12.5% of your discretionary income under the Trump plan, compared to 10% under some current income-based repayment plans. Like current income-oriented repayment plans, you would likely be liable for income tax on the amount of student loan forgiveness you receive.
Give up graduate student loans more slowly
There has been a growing trend to concentrate student loan exemption at the undergraduate level. Why? Borrowers with a graduate degree have a higher earning potential than borrowers with only an undergraduate degree. As such, higher education borrowers have the potential (albeit unsecured) to earn relatively more money and pay off their student loans with lower default rates. Trump would give a student loan waiver to student borrowers with federal student loan debt. However, rather than the 25 years of student loan repayment under existing income-tested plans, you will need to make 30 years of monthly payments to qualify for a student loan forgiveness. You would also be likely to be liable for income tax on the amount of student loan forgiveness you receive.
The November election could help decide the future of student loans on topics ranging from student loan cancellation to student loans to bankruptcy. This includes not only the presidential election, but also the election of Congress. Expect Congress to decide the fate of everything large-scale student loan forgiveness or changes to the bankruptcy code. Don’t expect a student loan forgiveness on the next raise. While the Democrats have proposed several initiatives to cancel student loan debt, Senate Republicans should not include canceling student loans in the next stimulus package. Joe Biden also has a student loan cancellation plan, which is different from the president’s plan. Expect these differences to become clearer in the coming months.
How to repay student loans
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