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.
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