President Trump announced a budget proposal Monday, Feb. 12, 2018, which is expected to affect the future of student loans in a plan that could eliminate the Public Service Loan Forgiveness Program which began in 2007.
In the past, students have had the advantage of the Public Service Loan Forgiveness Program if the former student is employed full-time at an eligible federal, state, or local public service job, and if they make 120 on-time payments for over 10 years. Students who do not fit this criteria are given the option of an income-based repayment plan. However, these two aspects of student loans may be going away due to Trump’s proposal and is set to be in effect for students who borrow from July 1, 2019 and on.
The new budget would also eliminate subsidized loans and affect the income-based repayment plan by cutting down the number of repayment plans from four to one. Additionally, undergraduate students may have their loans forgiven after 15 years, which would be five years sooner than before, but it would also mean higher monthly payments. For graduate students, their previous forgiveness requirement of 25 years will go up to 30 years. This budget will also increase the chance of the government going after borrowers who don’t pay back their loans, as well as cut funds for both work study and Pell Grants.
Though Trump’s proposal must be approved by Congress before changes can be put into effect, support for the budget means students are going to have less options and a lot more to take into consideration before borrowing. The vote will be taking place no later than six weeks after the budget has been submitted.
Student loans are a common asset that students utilize to help them pay for their college education. The main issue with these burdensome student loans is that the student borrowing money, will have to pay it back sooner or later and usually with an added interest.
Students have the choice between subsidized and unsubsidized loans when borrowing. With subsidized loans, the interest, an amount expressed as a percent of the loan that is charged to the borrower, is paid by the federal government while the student is still in school. Unsubsidized, on the other hand, means that the interest will build up as soon as the loan is issued. For some students, it can take 15 years or more after they graduate to pay off all their student loans.
Students who currently have loans taken out should be unaffected if the budget gets approved. The main concern is going to be those students who have to take out a loan during and after the Fall 2019 semester.