When it comes to your student loans, here’s where President Donald Trump stands on student loan forgiveness.
Here’s what you need to know.
There have been many changes to your student loans this year. Trump has been active in using executive action, with support from Congress, to provide financial relief to student loan borrowers in the wake of Covid-19. For example, under Trump’s latest executive action through a memorandum to U.S. Secretary of Education Betsy DeVos, Trump:
Trump extended this student loan relief through December 31, 2020, which means that these student loan benefits have lasted for the vast majority of 2020. It’s clear that Trump has supported student loan forbearance and interest forgiveness. Despite this student loan relief, there has been one policy that hasn’t been included: student loan forgiveness. Where does Trump stand on student loan forgiveness? Here are some perspectives:
End Student Loan Forgiveness Program
Trump would end the Public Service Loan Forgiveness program. Under Trump’s proposed budget, the Public Service Loan Forgiveness program would be eliminated. The Public Service Loan Forgiveness program is a federal program that forgives federal student loans for borrowers who are employed full-time with a qualified public service or a non-profit employer. The proposal would impact future borrowers, not existing borrowers who are already work in public service and currently are paying off student loans. Why cancel student loan forgiveness? Trump and DeVos want to balance the needs of both student loan borrowers and federal taxpayers. Eliminating this program, they argue, would save the federal government money from not having to forgive potentially billions of dollars of federal student loan debt. Trump also vetoed student loan forgiveness legislation to keep the borrower defense rule, which would help borrowers cancel student loan debt if they were the victim of fraud.
Simplify student loan repayment plans
Importantly, Trump does not propose to eliminate all student loan forgiveness. Rather, he specifically proposes to end the Public Service Loan Forgiveness program. Does Trump support student loan forgiveness? Yes, and he supports student loan forgiveness through income-driven repayment plans. However, Trump would reduce the number of student loan repayment plans to only one plan to simplify student loan repayment and help borrowers pay off student loans faster.
Forgive undergraduate student loans faster
Under Trump’s proposal, you could pay off undergraduate federal student loans under an income-based repayment plan that would provide student loan forgiveness after 15 years of student loan payments. Currently, you can receive federal student loan forgiveness for undergraduate student loans after 20 years, which means you could receive student loan forgiveness five years earlier. In exchange for receiving five years of fewer monthly student loan payments, you would pay 12.5% of your discretionary income under the Trump plan compared with 10% under some current income-driven repayment plans. Like current income-driven repayment plans, you would likely be liable for income taxes on the amount of student loan forgiveness that you receive.
Forgive graduate student loans slower
There has been a growing trend to focus student loan forgiveness at the undergraduate level. Why? Borrowers with graduate school degrees have higher earning potential than borrowers with only an undergraduate education. As such, graduate school borrowers have the potential (although not guaranteed) to earn relatively more money and pay off their student loans with lower default rates. Trump would provide student loan forgiveness for student borrowers with federal graduate school student loan debt. However, rather than the 25 years of student loan payments under existing income-driven repayment plans, you would need to make 30 years of monthly payments to receive student loan forgiveness. You would also likely be liable for income taxes on the amount of student loan forgiveness that you receive.
The election in November could help decide the future of student loans on topics ranging from student loan forgiveness to student loans and bankruptcy. This includes not only the presidential election, but also the congressional election. Expect Congress to decide the fate of any wide-scale student loan forgiveness or changes to the bankruptcy code. Don’t expect student loan forgiveness in the next stimulus. While Democrats have proposed several initiatives to cancel student loan debt, Senate Republicans are not expected to include student loan forgiveness in the next stimulus package. Joe Biden also has a plan for student loan forgiveness, which is different than the president’s plan. Expect those differences to become clearer in the coming months.
How to pay off student loans
Not sure how to pay off student loans? Start with these four options, all of which have no fees:
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