donald trump student loan forgiveness

Trump Student Loan Forgiveness: Could It Help You?

Donald Trump’s student loan forgiveness plan could provide real benefit to you if (a) he makes good on his promise, and (b) you have the right kind of student loan repayment plan.

One main big benefit would be that you could save a lot of money and your loan would be forgiven sooner.

Before we look at Trump’s proposed plan, you need to understand some potentially confusing terminology. Trump’s proposed plan would be a new type of Income-Driven Repayment Plan (IDR). Under current guidelines there are four different IDRs, each with slightly different terms and qualifications. They are: Revised Pay As You Earn (REPAYE), Pay As You Earn (PAYE), Income-Based Repayment (IBR) and Income-Contingent Repayment (ICR).

 

Here’s how federal student loan repayment could change under a Trump administration.

 

Trump Student Loan Forgiveness

As currently understood, Trump’s plan would most closely resemble the REPAYE Plan. Keeping in mind that none of this is law yet, here is what Trump proposes:

  • You would consolidate all of your current federal student loans (private loans contact us for further assistance) into a single plan.
  • When payments start, you would pay 12.5% of your discretionary income toward your loans. (The current REPAYE plan requires 10%.)
  • Your loan would be totally forgiven after 15 years. (Current loans cannot be forgiven for 20 or 25 years, depending on whether loans are for undergraduate or graduate study.)

 

Questions Remain

Trump has not yet explained specifically how the increased forgiveness amounts and resulting higher costs to taxpayers would be funded.

He has said he plans to lower federal spending accordingly. Trump has also promised to scale back funding significantly for the Department of Education.

The Department of Education currently spends about $11 billion on IBR plans annually. It is not known how much more the government would have to spend on a plan that forgives loans 5 to 10 years earlier than current regulations allow.

 

Congressional Action Not Required

Now that he’s president, Trump can enact his plan through the Department of Education without congressional approval. In fact, President Obama created two repayment plans through the Department of Education during his tenure.

 

According to Mark Kantrowitz, publisher and vice president of strategy at Cappex.com, “This [student loan repayment plan] could be implemented entirely through the regulatory process.”

 

Steps You Can Take Now

As you await more direction from the incoming administration, there are things you could do to prepare.

  • Do your best to stay out of default. In the past, new student loan programs have been difficult for those in default to enroll in, which might make enrolling in a new Trump plan problematic.
  • Make sure that all of your federal loans are consolidated in the direct loan program. If they are not, take action to do so.
  • If you are in default, you may want to enroll in an Income-Driven Repayment plan. Doing so will likely lower your payments. You will also be well positioned to take advantage of Trump’s student loan repayment plan should it come to pass.
  • If you are current on your payments, it may be advisable to stay put in your current loan(s) until the Trump plan is formally revealed. If your income is low enough and your balance high enough, the Trump plan may save you money, especially if forgiveness occurs after 15 years.
  • If you have private loans, they will likely not be eligible for Trump’s plan as it now stands. Our specialists can assist with with private loans, contact us today for a free consultation.
  • If you have Stafford Loans, check to see if you qualify for any of the Stafford forgiveness programs.
  • Check your eligibility for student loan forgiveness

 

Tweaking the Plan

Some observers like the idea of repaying federal student loans based on income, but feel adjustments are needed.

For one thing, they say, there should be a disincentive to pile on additional debt. Currently, with payments based solely on a percentage of income, your payments would be the same no matter how much student loan debt you carry.

One solution would be to require those with a higher balance to pay back their student debt at a higher percentage of income.

Others say it would be best if all federal student loans fall under an IDR plan. That way someone with higher income would not be able to obtain a standard plan at a lower rate as is allowed currently.

 

The Bottom Line

An Income-Driven Repayment plan such as the one Trump may enact could be good news for you, depending on your income and the balance owed on your student loans. If your balance is high enough and your income low enough, you could end up with much of your debt forgiven after 15 years.

On the other hand, if your income is high and your balance relatively low, you may pay off your debt in fewer than 15 years and have nothing left to forgive.

Once a Trump plan is in place, if you have a choice, it will be important to run the numbers before deciding which plan is best for you.

 

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Federal Student Loan Forgiveness Programs

Federal Student Loan Forgiveness Programs

Today, the standard federal student loan period is 10 years. For the borrowers who aren’t able to afford their monthly payments under the 10-year plan, the federal government has created income-driven repayment plans to help make student loan payments more affordable under the Federal Student Loan Forgiveness program and the William D Ford Act. If you are looking to qualify for a federal student loan forgiveness program, continue reading.

In certain situations, you can have your Federal student loan forgiven. Under the Pay As Your Earn (PAYE) and Revised Pay As You Earn (REPAYE), borrowers pay 10% of their discretionary income for 240 months (20 years). Under REPAYE if you have graduate loan debt, the repayment period is 25 years.

Trump plans to combine all the programs into one single plan to make it less confusing for borrowers. While Trump’s proposal raises the monthly payment cap from 10 % to 12.5% he cuts the repayment period by 5 years. He plans to pay for his new student loan plan by reducing federal spending overall.

 

PUBLIC SERVICE AND TEACHER LOAN FORGIVENESS

Those working as public servants or teachers who meet certain criteria, under the existing plans, are eligible for loan forgiveness after 120 consecutive monthly payments.

If Congress eliminated the Public Service Loan Forgiveness and placed all borrowers under the same income-based repayment plan, existing borrowers in the PSLF program would be grandfathered in.

 

OTHER POTENTIAL CHANGES

Expect to see other student loan policies emerge from Trump’s nominee for Secretary of Education, Betsy DeVos as well as other congressional leaders. These changes may include:

  1. Risk sharing between federal government and universities with respect to students who default on their student loans.
  2. Potential education of federal government’s role in student lending and a corresponding increase in the role of private lenders.
  3. Amount of “profit” the government generates from student loans, which may result in a reduction of interest rates for federal student loans.

 

Check if you qualify for student loan forgiveness now. No Credit card or payment information required.

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TOP 5 QUESTIONS AND ANSWERS

1. Will I save more money on my student loans under Trump’s plan compared to Obama’s existing plan ?

If Trump’s doesn’t change anything and everything else remains equal, student will be able to enjoy the forgiveness programs. Now, if Trump decides to change things around, you should think enrolling into the forgiveness programs soon as you will be grandfathered in once changes are made.

2. How do I apply for student loan forgiveness ?

There are a few factors that determine your eligibility for Federal Student Loan Forgiveness under the existing income-driven plans. To find out if an income-based repayment program is the best option for you, we suggest you speak with a loan specialist. They will be able to take a look at your loans and determine the best route for you. You can also read these 4 ways to get Federal Student Loan Forgiveness.

3. Under student loan forgiveness programs, “will I owe more money after the loan is forgiven ?”

If you have the right qualifications for student loan forgiveness programs, you WILL be saving a lot of money on your student loans as these programs are built to help borrows who are having a hard time paying their loans.

4. Will Trump’s plan lower my monthly student loan payment ?

This depends on what you’re being asked to pay now and if you’re grandfathered into an income-based program already.

5. What are the benefits and risks to income-driven repayment plans ?

Overall, the benefits of income-based repayment programs far outweigh the risks involved. These plans make it affordable for borrowers to pay back their student loans! While not being forced into a financial hardship in the process.

 

 

Under the standard repayment program, 10 years in length, borrowers are asked to pay roughly 1% of their current student loan balance every month. If someone owes $50,000, their monthly payments will be around $500/month. This isn’t affordable for the average American which is why these programs exist.

The main benefit: you’ll save money upfront by getting a lower monthly payment which extends the repayment period to 15 years. The yearly adjusted monthly payment will vary based on your income. We’ve seen students making $35,000 a year and paying nothing on their loans.

If you’d like to learn more and to see if you qualify for any of the FederalStudent Loan Forgiveness programs, contact us here or fill the form below and we’ll be in touch with you soon.

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