This week, Republican presidential nominee Donald Trump released his plan for student loans. In an attempt to connect with voters coping with student loan debt, it offers significant changes to our current systems to reduce the financial burden.
Trump’s student loan plan
During a rally in Ohio, Trump outlined the highlights of his proposal. Under his plan, the government would cap payments at 12.5 percent of the borrower’s income. If the borrower keeps up with payments for 15 years, the government would forgive the remaining loan balance.
Trump’s plan would also consolidate the current repayment programs in place and allow them to apply to both federal and private loans. (Currently, only federal student loans are eligible for income-driven repayment plans.) According to Trump, the new plan would be funded by reining in federal spending and the subsequent decrease in student loan defaults.
“Students should not be asked to pay more on the debt than they can afford,” said Trump at the rally, “And the debt should not be an albatross around their necks for the rest of their lives.”
His proposal is a radical shift to the current government programs. Today, borrowers have access to income-driven repayment plans such as Revised Pay As You Earn (REPAYE) and income-based repayment (IBR). But under those plans, the government does not forgive the balance of the debt until after 20-25 years of on-time payments.
Breaking with party lines
Trump’s plan raised some eyebrows, as it goes against the position the Republican party has held for years. Republicans have protested current income-driven repayment plans, saying the country could not afford the expense.
Even at a slightly higher payment cap – a proposed 12.5 percent of the borrower’s income, rather than the present 10 percent – the shorter repayment period of 15 years to earn loan forgiveness would result in a major cost. The government would end up forgiving massive amounts of debt, collect less in student loan payments, or both.
But Trump combats those projections by saying he will work to keep tuition costs low. He says he will require colleges to spend their endowments to lower the cost of attendance and decrease student loan debt.
However, critics say the math doesn’t add up, and that it could end up costing taxpayers significantly more than they pay now.
While Trump hasn’t released projected costs of his plan, the government would likely collect less from borrowers repaying student loans under his proposed plan.
For example, checking the math based on what we know about Trump’s plan: a borrower with $80,000 in federal student loan debt at a weighted average interest rate of 5.5% and starting salary of $55,000 would pay a total of about $14,000 less under Trump’s plan compared to repayment under Pay As You Earn.
While this would be great news for student loan borrowers, it’s possible the overall costs for the federal government and taxpayers will increase beyond what some lawmakers already consider to be too expensive.
Donald Trump’s new plan is very different than that of Democratic nominee Hillary Clinton. She released her plan last year at the start of her campaign. Clinton proposes capping payments at 10 percent of discretionary income (as they are currently) and forgiving the balance after 20 years, like current income-driven repayment plans.
Notably, she also wants to allow borrowers with federal student loans to refinance their debt at current interest rates. Right now, the only refinancing options for federal borrowers is through private lenders.
Finally, Clinton wants to make state colleges free for students from families who make less than $125,000 a year. Her campaign says the plan would cost $350 billion over the course of 10 years. But the government would pay for it by cutting tax deductions for high-income taxpayers.
“No family and no student should have to borrow to pay tuition at a public college or university,” said Clinton at a campaign stop. “And everyone who has student loan debt should be able to finance it at a lower rate.”
Additionally, she wants to develop programs for nontraditional students, such as adult learners returning to school and immigrants to the United States.
But opponents on the other side of the aisle say her plan is built on assumptions. The proposal could be more expensive than Clinton even predicts as the size and scope changes.
Student loans in the news
Student loans have become a major discussion point in both Trump and Clinton’s campaigns. As both candidates attempt to court young voters, student loans are a serious concern.
Americans owe $1.3 trillion in student loan debt spread across 43 million borrowers. The average graduate from the class of 2016 who took out loans to pay for school has $37,173 in student loans, a six percent increase from the previous year.
Students loans are responsible for delaying borrowers from starting businesses, changing jobs, getting married, and buying homes. Many Americans are utterly broke because they cannot keep up with their loan payments.
With such controversy and need for reform, young voters are pressuring the presidential candidates to come up with serious proposals for change.
Student loans and politics
Millions of Americans are burdened with student loans and struggling to keep up with their payments. It is one of the most important concerns facing young voters today. That issue makes it a major point of contention for politicians, especially for Trump and Clinton who are engaged in a bitter battle.
While their approaches are very different, Trump and Clinton are in agreement in one area: the student loan system needs reform. Both candidates have presented significant changes to federal loans, signifying the seriousness of the issue.
This election has serious ramifications, including reforms to the student loan system. If you want to see change, cast your vote in November.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
|Lender||Variable APR||Eligible Degrees|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Earnest.
To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.
Earnest fixed rate loan rates range from 3.89% APR (with Auto Pay) to 7.89% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.97% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of Month/Day/Year, and are subject to change based on market conditions and borrower eligibility.
Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.
The information provided on this page is updated as of 08/21/18. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at email@example.com, or call 888-601-2801 for more information on ourstudent loan refinance product.
© 2018 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.
2 Important Disclosures for Laurel Road.
Laurel Road Disclosures
APR stands for “Annual Percentage Rate.” Rates listed include a 0.25% EFT discount, for automatic payments made from a checking or savings account. Interest rates as of 11/8/2018. Rates subject to change.
Variable rate options consist of a range from 3.27% per year to 6.09% per year for a 5-year term, 4.64% per year to 6.14% per year for a 7-year term, 4.69% per year to 6.19% per year for a 10-year term, 4.94% per year to 6.44% per year for a 15-year term, or 5.19% per year to 6.69% per year for a 20-year term, with no origination fees. APR is subject to increase after consummation. The variable interest rate will change on the first day of every month (“Change Date”) if the Current Index changes. The variable interest rates are based on a Current Index, which is the 1-month London Interbank Offered Rate (LIBOR) (currency in US dollars), as published on The Wall Street Journal’s website. The variable interest rates and Annual Percentage Rate (APR) will increase or decrease when the 1-month LIBOR index changes. The variable interest rates are calculated by adding a margin ranging from 0.98% to 3.80% for the 5-year term loan, 2.35% to 3.85% for the 7-year term loan, 2.40% to 3.90% for the 10-year term loan, 2.65% to 4.15% for the 15-year term loan, and 2.90% to 4.40% for the 20-year term loan, respectively, to the 1-month LIBOR index published on the 25th day of each month immediately preceding each “Change Date,” as defined above, rounded to two decimal places, with no origination fees. If the 25th day of the month is not a business day or is a US federal holiday, the reference date will be the most recent date preceding the 25th day of the month that is a business day. The monthly payment for a sample $10,000 loan at a range of 3.27% per year to 6.09% per year for a 5-year term would be from $180.89 to $193.75. The monthly payment for a sample $10,000 loan at a range of 4.64% per year to 6.14% per year for a 7-year term would be from $139.65 to $146.76. The monthly payment for a sample $10,000 loan at a range of 4.69% per year to 6.19% per year for a 10-year term would be from $104.56 to $111.98. The monthly payment for a sample $10,000 loan at a range of 4.94% per year to 6.44% per year for a 15-year term would be from $78.77 to $86.78. The monthly payment for a sample $10,000 loan at a range of 5.19% per year to 6.69% per year for a 20-year term would be from $67.05 to $75.68.
However, if the borrower chooses to make monthly payments automatically by electronic funds transfer (EFT) from a bank account, the variable rate will decrease by 0.25%, and will increase back up to the regular variable interest rate described in the preceding paragraph if the borrower stops making (or we stop accepting) monthly payments automatically by EFT from the designated borrower’s bank account.
3 Important Disclosures for SoFi.
4 Important Disclosures for LendKey.
Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it endorse, any educational institution.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown.
All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 2.28% effective October 10, 2018.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.46% – 6.97%1||Undergrad & Graduate|
|2.57% – 8.44%4||Undergrad & Graduate|
|3.05% – 6.47%2||Undergrad & Graduate|
|2.50% – 7.24%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|