Trump Budget Proposal Takes Aim at IDR, PSLF, and Billions in Grants

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With the latest Congressional budget battle just ended, President Donald Trump just submitted his budget proposal for fiscal year 2019. The $4.4 trillion budget boosts spending on the military and infrastructure while cutting funding a number of programs, including Medicare.

Among the Trump budget cuts are those to education spending. The budget calls for huge changes to the way student loans are repaid — including streamlining the income-driven repayment (IDR) program and getting rid of Public Service Loan Forgiveness (PSLF).

However, some of the suggestions in the Trump budget proposal are what we’ve seen before, including changes to IDR and PSLF.

“There’s not a lot that’s new here,” said Adam Minsky, a student loan lawyer. “He’s made these proposals before. Right now, some of the issues raised in the Trump administration’s proposal are addressed in the PROSPER Act, a higher education bill going through Congress right now.”

What’s in the education portion of the Trump budget proposal?

The Trump budget cuts $3.8 billion to programs in the Department of Education, although there is an addendum to the budget, suggesting that $3.3 billion could be restored over the course of two years.

Department of Education Secretary Betsy DeVos praised the budget suggestions in a statement, saying that it “expands education freedom for America’s families while protecting our nation’s most vulnerable students.”

“The budget also reflects our commitment to spending taxpayer dollars wisely and efficiently by consolidating and eliminating duplicative and ineffective federal programs that are better handled at the state or local level,” DeVos said.

Here are some of the items addressed by the Trump budget.

Streamline IDR

When it comes to Trump student loans, the president has been promising to streamline the system since he was campaigning. The idea of reducing income-based repayment options down to one does streamline the system, and could potentially make it easier to navigate. Plus, the budget proposal calls for automatically enrolling some borrowers in IDR if it looks like they are falling behind.

“I’m all in favor of streamlining and even automatic enrollment for some borrowers,” said Minsky. “The idea of dropping down to one plan sounds good. It should eliminate a lot of headaches. Unfortunately, the devil is in the details once you dig deeper.”

Some of those details include changes to how long it takes to receive forgiveness. For undergraduate students, Trump’s plan calls for forgiveness after 15 years — a change from the current system that allows forgiveness after either 20 or 25 years.

Grad students wouldn’t fare so well, however. They would have to wait 30 years to see forgiveness of their loans under the Trump plan for student loans.

Finally, the Trump administration’s proposal would cap IDR payments at 12.5% of discretionary income. The current cap is 10%.

How does this compare to the PROSPER Act?

Like the Trump budget, the PROSPER Act also suggests getting rid of multiple federal loan repayment programs and replacing them.

However, in the PROSPER Act, loan principals are never forgiven. Instead, the interest is capped after 10 years of payment. But you still have to repay every penny you borrowed — no matter what.

Finally, instead of capping IDR payments at 12.5% of discretionary income, the PROSPER Act raises the monthly amount paid to 15% of monthly income.

End to PSLF

The administration’s budget proposal, like the PROSPER Act, puts an end to PSLF, a popular program that allows borrowers to have their loan balances forgiven after making 120 qualifying payments while working for nonprofit or government agencies.

While the budget proposal points out that getting rid of PSLF would save the government billions of dollars, it could have consequences for many low-income workers.

“Eliminating PSLF would be an acknowledgment that we will be burying those who work in the public and not-for-profit sector in even more debt,” said Justin Draeger, president of the National Association of Student Financial Aid Administrators (NASFAA). “There will be well-deserved, widespread backlash at the idea of taking away benefits away from our nation’s educators, firefighters, police officers, nurses, and social workers.”

Other Trump budget cuts to education programs

In addition to these drastic changes to repayment options, the Trump budget also cuts funding to several programs, including:

  • Supporting Effective Instruction State Grants
  • Federal Supplemental Educational Opportunity Grant
  • 21st Century Community Learning Centers
  • Student Support and Academic Enrichment Grants
  • Comprehensive Literacy Development
  • Teacher Quality Partnership

Pell grants

The Trump budget does call for expanding Pell grants so that they can be used for certificate and other short-term academic courses. Right now, Pell grants can’t be used for academic programs that are shorter than 15 weeks or that include fewer than 600 hours’ worth of instruction.

In the PROSPER Act, the suggestion is to provide a “bonus” of $300 to students who enroll in at least 15 credits per semester.

Will the Trump budget make it through Congress?

Any president’s budget proposal is a wishlist, said Minsky. Once it gets to Congress, it could see a number of changes. Additionally, legislators will have to determine which items will be taken care of in the PROSPER Act, rather than as part of a budget.

Draeger takes comfort in the idea that many of the Trump budget cuts might not make it through.

“Attempting to balance the budget on the backs of college students is profoundly short-sighted, if not downright destructive,” Draeger said. “We call on Congress to continue to adequately fund the student aid programs and move forward with thoughtful, deliberative, and reasonable proposals for student aid reform and investment.”

For now, Minsky suggests reading up on the situation and paying attention to pending legislation — and contacting your representatives. You can identify the members of the House and Senate from your district, and find out how to contact them, by using GovTrack.

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Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.