For students trying to afford their education, changes can appear every time a new President comes into office. This is particularly true looking at the different approaches Presidents Trump and Obama have when dealing with the costs of higher education. If you are concerned about possible changes to your student loans and how they will impact your ability to meet your debt obligations, keep reading to find out what might be changing. You should also consult with a professional to review your existing loans and help you structure a manageable repayment plan.
When comparing President Obama and Trump’s plans for student loans it is important to note that the Obama student loan repayment plan is much more concrete because it has had time to be legally established. It is important to note that the Trump plans are, for the most part, still being formalized and have to be made into law to take effect. With that being said, here are the existing Obama student loan repayment plans and how they may be changed under the Presidency of Donald Trump and his education and student debt policies.
Pay As You Earn Programs
The existing student loan repayment plan that was crafted under President Obama only applies to federal loans, meaning private loans do not qualify for these benefits. The Obama repayment plan focused on how to help student loan borrowers better afford their payments. Beginning in 2014, borrowers that met the set criteria could make student loan payments of 10% of their discretionary income. This plan was designed to help borrowers that were struggling to make ends meet and having a hard time meeting their loan obligation.
The Obama pay as you earn program also allows borrowers that would be held to a repayment term of 10 years extend the term to 20 or 25 years. By extending the payment period, the borrower could make much lower monthly payments, making them much more manageable. Borrowers that were not in default and had made consistent payments for 20 years could qualify for loan forgiveness and have the remainder of their loan obligation cancelled.
While the Obama student loan repayment plan goes to great lengths to try and make loans more affordable, President Trump’s strategy varies. He has expressed his desire to consolidate all existing income based repayment plans into one plan. This means that the existing options under Obama’s administration: PAYE – Pay as You Earn, REPAYE – Revised Pay as You Earn, IBR – Income Based Repayment, and ICR – Income Contingent Repayment would all be streamlined into one plan. President Trump’s most recent proposal included capping a borrower’s payment at 12.5% of the borrower’s income. This change could result in higher payment for a borrower but may also allow for an earlier repayment of the loan. President Trump has also suggested waiving the balance of qualifying student loans after 15 years instead of the current 20 or 25 years.
Public Service Loan Forgiveness
The current student loan programs established under President Obama also include forgiveness opportunities for borrowers who choose professions in public service and qualify. The student loan forgiveness scheme or Public Service Loan Forgiveness program forgives the remaining balance on a borrower’s Direct Loans if a qualifying borrower makes 10 years of consecutive and works full-time for a qualifying employer. Qualifying employers may include government entities, nonprofit 501c3 companies and organizations such as the Peace Corp. The PSLF program can save a borrower significant money as he or she will be making 10 years’ worth of payments instead of 20 or 25.
President Trump and his appointed Secretary of Education, Betsy Devos’s initial education budget seeks to eliminate the PSLF program altogether. If this were to become law, this means eligible borrowers under the public service loan forgiveness program could lose the ability to have their loans forgiven. If you believe you may qualify for the Public Service Loan Forgiveness program it is important that you consolidate your loans into the Direct Loan program and certify your employment status immediately (https://www.studentdebtrelief.us/forgiveness/trump-student-loan-forgiveness/). There is no guarantee that this will enable you to use the PSLF program, but these steps may help if the program is altered or eliminated.
Interest deduction and interest rates
Another interesting shift in how student loans are handled has to do with interest, both as a deduction and income generating tool. President Trump has stated that the government should not make money off of student loans. This may mean he would try to eliminate revenue generating interest rates which could in turn mean lower payments for borrowers.
President Trump may also bring about change regarding the existing interest deduction. Under Obama’s administration interest paid on student loans could be deducted up to $2500 depending on your tax bracket. President Trump’s proposed Tax Cuts & Jobs Act would eliminate that interest rate deduction altogether.
In addition to interest deductions, graduate tuition waivers may also become a thing of the past. The graduate tuition waiver allows a graduate to take a job at the university he or she is attending for discounted tuition. This tuition discount can translate to a savings of thousands of dollars. The current administration may now consider the tuition saved as taxable income. This could create a tax bill for students that don’t have paying jobs or an income stream.
The current political landscape is ever evolving and there seem to be some substantial changes coming with this administration that will directly impact student loan borrowers. If you are in need of an assessment of how those changes may affect you, please contact our office. We can explain how your loans and specific situation may be impacted. We can also help explain your student debt relief options if you are having trouble managing your monthly payments.
Guest Post Author
Kevin Fallon McCarthy is the McCarthy Law PLC’s managing attorney and an experienced Phoenix debt attorney. Has has been a member of the Arizona Bar since 1986. He has worked in private practice as a lawyer at Ryley, Carlock & Applewhite, P.A., a large law firm based in Phoenix, AZ.
The Difference Between Obama and Trump Student Loan Repayment Plan. If you have experience..please, share your comments below…
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