Trump’s Student Loan Plan Could Save Undergraduates Money

Trump's student loan plan

President Donald Trump is in the news again, but the reason might surprise you. The Brookings Institution, a research group based in Washington, D.C., released a study that found Trump’s student loan plan could help thousands of undergraduate students save money.

Thanks to the proposal’s expansion of student loan forgiveness, undergraduate students could save thousands of dollars. Not everyone would benefit, though; the proposal would shift the burden onto graduate students.

Here’s what you need to know about the study’s findings and how the proposal could affect you.

What’s in Trump’s student loan plan?

President Trump’s plan proposes serious changes to the current federal student loan program. Here are four of the biggest shifts:

  1. Ending Public Service Loan Forgiveness (PSLF): Trump’s proposal would end the PSLF program for new borrowers. Current borrowers would still be eligible for forgiveness. But students who take out federal loans on or after July 1, 2018, would no longer qualify for forgiveness after 10 years.
  2. Eliminating Subsidized Stafford Loans: Trump would stop Subsidized Stafford Loans, which are federal loans for low-income students with lower interest rates. All borrowers would have the same loan options and interest rates.
  3. Expanding Pell Grants: Under the current structure, Pell Grant recipients can’t use the grants for summer classes or remedial courses. Trump’s plan would expand Pell Grants so students could use them for those courses. That’s a change many Democratic politicians agree is a good idea.
  4. Changing some income-driven repayment (IDR) plans: Trump would change some IDR plans for students. Undergraduates would have to pay 12.5 percent of their discretionary income instead of 10 percent, but the government would forgive their loans after 15 years rather than 20. Graduate students, on the other hand, would have to make 30 years of payments before the government would discharge their loans.

Democrats likely will fight some parts of the plan, such as the change to Stafford Loans, but other areas might get bipartisan support.

Brookings Institution study results

The Brookings Institution used hypothetical scenarios to figure out how much borrowers would pay with the proposed changes compared to the current system.

Overall, the researchers found that borrowers would see an increase in benefits and could save money. That perk is especially true for undergraduates who have above-average debt.

For example, if an undergraduate student had $15,000 in loans and a starting income of $20,000, their monthly payment under today’s income-based repayment plan would be $16 — 10 percent of their discretionary income. After 15 years of making payments, the student would pay back $15,602.

Under Trump’s proposal, the borrower would pay 12.5 percent of their discretionary income — or $20 a month. But they’d get forgiveness five years sooner and pay back just $10,954. The change would save them more than $4,500. A person with more debt and a higher income would save even more.

However, graduate students would see a decrease in IDR plan benefits. Like undergraduate students, they’d pay more of their discretionary income toward their loans. Additionally, they’d make payments for 15 years longer than undergrads and end up paying more than they would under the current system.

Under today’s plan, if a graduate student borrowed $50,000 in student loans and made $40,000 per year, they’d pay back $75,152 over 20 years of payments. The government would forgive $32,011. Under Trump’s plan, that same student would pay more than $100,000 and pay back their loans in full in 23 years without any loan forgiveness.

The justification for this change is the fact that people with a graduate degree tend to make more money than people with only an undergraduate degree.

As of 2015, young adults who had a bachelor’s degree and worked full time had a median salary of $50,000. Those with a master’s degree had a median salary of $60,000. That’s a 20 percent increase.

What this plan means for you

If you’re an undergraduate student, Trump’s student loan plan might sound like a great deal. For graduate students, the proposal might be frightening.

In either case, it’s important to remember that Congress hasn’t voted on this plan yet. Only some of President Trump’s changes might make it through — or none at all.

These changes aren’t likely to happen anytime soon. However, you can help advocate for or against Trump’s student loan plan by contacting your congressmen or congresswomen and letting them know your thoughts. If you don’t know where to start, Congress.gov has a comprehensive list of all members of Congress.

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Published in News, Student Loans