What Trump’s Budget Plan Will Mean for Your Student Loan

President Trump’s fiscal 2021 budget fell this week, and it’s terrible. Among the hundreds of pages of planned changes, you will find that Trump wants to cut $ 5.6 billion in funding for the Department of Education – a 7.8% cut.

The budget for 2021 will make major changes to the way we receive and pay off loans for higher education spending.

Take a look at some of the key cuts Trump wants to make:

  • Waiver of subsidized Stafford loans that do not charge interest while you are credited.
  • Waiver of the additional education subsidy, which is usually given to independent students or to those whose families earn less than $ 30,000 a year.
  • $ 630 million cut in Federal Work Program funding.
  • Reduction of income-oriented loan repayment programs to one option. Instead of paying 10% of your income, you pay 12.5%. Payment plans will be for 15 years instead of 20, and the rest will be forgiven, but graduate students will have to make payments over 30 years in accordance with an income-based payout.
  • Abandoning the government service loan forgiveness program.

Inside Higher Ed notes that Trump has been proposing to cut back on higher education during each year of his tenure. This is not the first time he has announced plans to end the government service loan forgiveness programs (which were in last year’s budget) and continuing education grants (repeating from the fiscal 2019 budget ).

The Center for American Progress estimates that the cut in bailout will add $ 70 billion to borrowers over 10 years.

There are several positives about the budget, including the following:

  • Restoration of eligibility for the federal Pell Grant for short-term programs and for some currently imprisoned students who will be released within five years.
  • Increased funding for career and technical education by $ 900 million.
  • Limiting annual and life loans for graduates and parents. Parent PLUS student loans will be capped at $ 26,500. For graduate students, it will be capped at $ 50,000 per year and $ 100,000 in total.

Congress lifted restrictions on student loans in 1992; According to Inside Higher Ed, this allowed parents to start borrowing the full cost of attendance to educate their child through a simple credit check.

While the proposed changes seem big, remember that the budget is basically a long, wordy proposal card that the president passes on to Congress.

“The White House budget is usually viewed as a political document,” notes the New York Times . “Congress, which is responsible for approving government spending, is not obligated to comply with the demands of the White House.”

There is, of course, another big problem with Trump’s budget plan: his ability to get Congress to make his plans a reality depends in part on his re-election in a few months; Fiscal 2021 for the federal government begins in October 2020.

But, as we discussed earlier, a president or president-elect can only make a certain amount of effort to achieve his own political goals, thanks to the balance of power that the Founding Fathers envisioned. So while your budget is worth keeping an eye on, don’t expect any drastic changes in your loans or repayment plans yet.

This post has been updated to correct the federal government’s fiscal year.

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