What You Need to Know About Student Loans Under the Trump Administration
BY ROBERT PARMER
College students in the U.S. are at war with student debt. While this isn’t a particularly new battle, the financial war is for from over.
The cumulative student loan debt at the end of 2016 was about 170 percent higher than the levels of student debt a decade earlier.
Additionally, more and more people are defaulting on loans. Just last year, an additional 1.1 million people had defaulting loans, which is a massive rise compared to the 400,000 added in 2015.
But, what does this all mean for the college students of today?
For starters, we must stay up-to-date on current events involving student finances, especially student loans. It’s more important than ever for students to research what options are best for them long term and to wisely maximize financial aid, in order to avoid incurring extra debt.
We know that change is on the horizon. With a new administration in office, change is inevitable. But to what degree? What will the future of higher education finances look like? Here’s what we know so far:
Under a New Administration
There’s been a lot of talk about the evolution of student debt in the U.S. Just in the first four months of the Trump administration, there has been much proposed change.
First of all, the new Secretary of Education Betsy DeVos, has reimposed a 16 percent fee on student loans that have defaulted. DeVos and Trump agree that the Public Service Loan Forgiveness Program currently in effect is invalid. This loan forgiveness program excuses a remaining balance on Direct Loans for those who qualify, so long as 120 consecutive monthly payments are made. They are pushing for its removal.
Trump’s budget proposal also wants to eliminate interest breaks when students are attending college and in deferment. This means that getting back on track, for those finishing a degree and struggling to pay for college or pay back loans will only get more difficult if this is all set in motion.
Essentially, it’s looking like it will become more difficult and expensive for students to get loans and feasibly pay them back.
This all being said, the state of loan deferrals wasn’t necessarily in a good place before the Trump administration took over. By the end of President Obama’s last term the total student debt was up to just about $1.5 trillion. It’s hit epidemic proportions and may only continue to rise.
As the Secretary of Education, it’s DeVos’ job to oversee this massive wave of debt and come up with some solutions. A recent statement by Illinois Senator Dick Durbin points out some problems with the DeVos course of action:
“Your budget increases the interest burden of students. Your budget freezes the Pell Grant so they have to borrow more. Your budget doesn’t give them public loan forgiveness.”
DeVos responded by claiming that her budget plans will streamline loan repayments by making the process easier to navigate for students in debt. She added by stating that these initiatives will reduce the loan burden for those who utilize income-driven repayment programs.
However, the plan also call for budget cuts to federal aid programs. It would also get rid of some of these specific programs entirely. These are the likely negative side effects to budget cuts:
- Upwards of $143 billion in available student aid will be cut.
- Work Study job for students will suffer as about half will be cut in the next year.
- About 3 million low-income students will not be able to get certain financial aid.
- The Public Service Loan Forgiveness program will crumble.
Just remember, these proposals are not set in stone. They may not all become reality, but it’s important to know they may become reality. College students of today must remain resilient and educate themselves in these matters.
Plans for Alleviating Student Debt
What we can do now as students is simply try our absolute best to take out as few loans as possible and come up with concrete plans to pay them back. We must do this as quickly as possible to avoid suffering financially in the long run. This starts by making simple lifestyle changes, and evolves when students create uniquely tailored, rigid financial plans to stay out of debt.
A good starting point is to identify elements to life that are costly and unnecessary. This could be stopping on your way to class and getting a latte each morning, smoking cigarettes, or eating out at restaurants all the time. After figuring out specific places where money is being overspent, eliminate those spending habits or refine them. Create a budget and move money that would have spent on luxuries into a savings account for paying back college.
This is easier said than done for most people, but persistence literally pays off.
In order to avoid misunderstandings of changing laws, students must arm themselves with current knowledge on all things related to student finances. Here are some additional resources to help increase understanding and hopefully result in less student debt:
- College Student Loan Resources
- Top 5 Financial Aid Terms You Need to Know
- College Finance Glossary
Robert Parmer is a freelance web writer and student of Boise State University. Outside of writing whenever he has spare time, Robert enjoys creating and recording music, caring for his pet cat, and commuting by bicycle.