Nearly 40% of student loan borrowers believed a Trump presidency would have a negative effect on their loans, according to our January 2017 survey on the president and debt. They might have been right to be concerned.
The president didn’t mention the issue during his January 2018 State of the Union address, but Education Secretary Betsy DeVos has taken aim at a variety of student loan policies since she was confirmed to the Cabinet position last year.
Find out how your student loan debt journey has been affected since President Donald Trump took office.
5 ways student loan repayment is becoming more difficult
Here are the ways loan repayment would become more difficult for student borrowers under proposals by DeVos and the Trump administration.
1. Having a single federal loan servicer
In April 2017, DeVos rolled back Obama-era protections that made student loan servicers accountable to the Federal Student Aid office.
DeVos said via a WSJ Journal op-ed in May 2017 that she would shrink the number of loan servicers from nine to one when current servicer contracts expire in 2019.
That might seem like a positive change for borrowers. You could make one monthly payment to a single servicer instead of a handful of them, without resorting to a Direct Consolidation Loan.
But consider the possibility that you have trouble with one or more of your current servicers. The Department of Education could choose a poor-performing servicer as the only option for federal loans, limiting your scope for relief. For example, Navient, one of the contenders for the exclusive government contract, was sued a fourth time in 2017.
Rohit Chopra, a fellow at the Consumer Federation of America, warned in a New York Times article of a bigger problem. He said that these changes could mean higher profits for the student loan industry but fail to curb high levels of default.
2. Raising monthly payments for borrowers on IDR plans
On a positive note, having one IDR option instead of four would simplify choices for Direct Loan borrowers. Trump’s plan also would automatically enroll borrowers in IDR plans once they start falling behind in payments.
But under the new proposal, new borrowers would have to make payments of up to 12.5% of their discretionary income instead of the current 10%.
Say your monthly discretionary income is $1,500. Under the current system, your IDR monthly payment would be $150. Under Trump’s proposal, your payment would jump to $187.50.
If you’re scraping by to make ends meet each month, that extra $38 could be costly.
Under Trump’s plan, graduate and professional student borrowers also would lose some access to loan forgiveness features available under current IDR plans. Borrowers’ loan balances wouldn’t be zeroed out until after making 30 years of payments. Currently, it’s 20 or 25 years depending on when the federal loans were taken out.
Undergraduate borrowers, however, would see forgiveness in 15 years, which would be 10 to 15 years faster than under the current system.
3. Ending forgiveness for public service workers
The Trump administration also is taking aim at Public Service Loan Forgiveness (PSLF).
The PSLF program currently promises to wipe out the education debt of nonprofit and government workers who make 120 qualifying monthly payments.
Trump’s budget proposal would keep PSLF intact for current borrowers, but it would eliminate the program for students who take their first federal loans on or after July 1, 2018, according to The Washington Post.
If you’re planning on working in public service but haven’t taken out a federal loan, the end of PSLF would make repayment more difficult. And it could dissuade you from pursuing a career in public service.
4. Stalling loan forgiveness for defrauded students
Borrowers who have been defrauded by their school have had trouble applying for and receiving student loan forgiveness since Trump took office.
DeVos plans to make achieving loan forgiveness even harder, according to a January 2018 article from Politico. Under her draft proposal, DeVos wants defrauded students to prove that their school intentionally misled them. The article also says forgiveness would be awarded only after considering the student’s income level, which is not the case now.
5. Removing protection for borrowers in default
In March 2017, the Trump administration undid an Obama-era protection for borrowers who defaulted on their student loans. Debt collectors can now charge fees to borrowers who entered default by not making a loan payment for 270 days.
Previously, borrowers who managed to get out of default weren’t subject to big collection fees.
Stay on top of student loan policies and bills
You can’t count on the government to solve all your student loan problems, but you can keep tabs on legislation passing through Congress via our student loan bill tracker. Take a look to see how your student loan might be affected.
The policies can keep changing, so you should focus more energy on repaying your education debt as quickly as possible. You can start by using our student loan payment calculator to figure out how you can increase monthly payments and get out of debt faster.
Interested in refinancing student loans?Here are the top 6 lenders of 2018!
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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 6.97% APR (with Auto Pay). Variable rate loan rates range from 2.47% APR (with Auto Pay) to 6.30% 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 firstname.lastname@example.org, or call 888-601-2801 for more information on ourstudent loan refinance product.
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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.
6 Important Disclosures for Citizens Bank.
Citizens Bank Disclosures
|2.47% – 6.99%3||Undergrad & Graduate|
|2.47% – 6.30%1||Undergrad & Graduate|
|2.51% – 8.09%4||Undergrad & Graduate|
|3.02% – 6.44%2||Undergrad & Graduate|
|2.48% – 6.25%5||Undergrad & Graduate|
|2.79% – 8.39%6||Undergrad & Graduate|