Under the new budget that President Trump proposed on Monday, several student loan programs are slated to take major hits.
The Public Service Loan Forgiveness program, which forgives federal student loans for borrowers employed full-time in an eligible federal, state, or local public service job, is slated for elimination. Since its inception in 2007, almost 750,000 borrowers have taken advantage of the program, which also requires 10 years of employment in a public service role.
Though the cuts to Public Service Loan Forgiveness appear negative, the other impacts to the student loan process as a whole could serve to simplify the process and reduce the number of years students have to pay the government back.
Today, borrowers are faced with a choice between a Standard Student Loan Repayment plan (paying off a fixed amount each month to settle their debt within 10 years), an Extended Student Loan Repayment plan (paying off debt over a longer period of time in smaller amounts, therefore accruing more interest), an Income-Driven plan (paying off debt based on income), a Pay as You Earn plan, or an Income Contingent Repayment plan.
If that sounds confusing that’s because it is.
Students graduating college with debt can be faced with a dizzying array of options, leading them to choose one that will drive them further into debt.
The proposed changes to the Federal Student Loan Repayment program attempt to combine the current federal repayment plans into a single, income-based student loan repayment plan. It also changes the required time frame for repayment and alters the percentage of income borrowers must pay.
Currently, borrowers must pay 10 percent of their discretionary income each month for 20 years, after which the remaining debt is forgiven. The new plan requires a payment amounting to 12.5 percent of income, but debt would be forgiven after 15 years. Though the percentage per month appears higher, borrowers could actually save in the long run because they will accrue less interest.
The proposed plan only affects federally funded student loans, not private student loans.
The simplification of the student loan repayment process into one plan also serves to reduce the federal government’s involvement in higher education, a move commensurate with the overall reduction of funding allocated to the Department of Education — a campaign promise that Trump appears set on keeping.
Kate Hardiman is pursuing a master’s in education from Notre Dame University and teaches English and religion at a high school in Chicago.
