Donald Trump’s Student Loan Plan: What It Could Mean for You

President Trump has proposed canceling Public Service Loan Forgiveness and changing income-driven repayment.

Cecilia ClarkOctober 9, 2020
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Donald Trump’s Student Loan Plan: What It Could Mean for You

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The student loan plan of President Donald Trump or former Vice President Joe Biden might not be the reason you vote in November. But the winning candidate’s policies could affect your financial future if you're planning to attend college or have student loans to repay.

Remember that each candidate’s proposals may or may not come to fruition, and those that become law may evolve significantly in the process.

You can learn more about Vice President Biden's education platform here. Here’s where Trump stands on some of the biggest higher education issues.

Revised income-driven repayment

Trump has proposed combining all existing income-driven repayment plans into one. Here’s how it would work:

  • Maximum payment terms would change. Undergraduate loans would decrease from a 20-year to a 15-year repayment term, and graduate loans would increase from a 25-year to a 30-year repayment term.

  • You’d pay 12.5% of discretionary income. Current income-driven options set payments between 10% and 20% of your discretionary income, depending on the plan.

  • Some borrowers may be automatically enrolled. Borrowers have to opt in to current income-driven repayment plans. That would remain unchanged if plans are consolidated under Trump, with the exception of borrowers deemed as severely delinquent. These borrowers may be automatically enrolled under the Trump plan.

Student loan forgiveness programs

Trump proposes ending Public Service Loan Forgiveness, which forgives federal student loan debt for qualifying public service and nonprofit employees after 10 years of eligible payments. Instead, his plan would funnel borrowers into the consolidated income-driven repayment plan and forgive remaining balances after 15 years. Unlike with existing PSLF, canceled balances would be taxable.

Capping student loan amounts

Trump proposes limits on federal PLUS loans, which allow parents and graduate students to borrow up to their school’s cost of attendance minus other aid received. The change would limit graduate PLUS loans to $50,000 per year and $100,000 total, and parent PLUS loans to $26,500 in aggregate.

Other federal student loan limits are set at amounts that often fall below the cost of attendance.

Trump also wants to give financial aid administrators more power in setting loan limits for their schools. This measure is intended to empower schools to prevent students from overborrowing.

Ending subsidized student loans

Trump’s 2021 budget proposal calls for the termination of federal subsidized student loans. Subsidized student loans are need-based and don’t accrue interest while the student is enrolled in school.

Instead, students would have the option to take out unsubsidized loans, which charge interest from the first day of payout.

Canceling existing student loans

While Trump does not have a plan for student loan debt cancellation, he has halted federal student loan payments through the end of the year in response to the COVID-19 crisis. Student loans also won’t accrue interest during this period.

Additional proposals

Trump has also voiced support for additional aspects of college financing:

  • Extending Pell Grant eligibility. Pell Grants are available to students with financial need and are currently capped at $6,345. Trump plans to expand eligibility for students in qualified skills-based programs.

  • Reducing funding for work-study. Trump proposed $630 million in reductions to the federal work-study program. Less funding could result in fewer students having access to the program.

The information above is based on details listed in the Trump administration's fiscal year 2021 budget proposal. The Trump campaign did not respond to a request for comment.

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