President Trump recently released his 2020 budget for the coming physical year. There are a number of financial changes to higher education and, with it, student loans. If you currently are looking at applying for student loans or if you are repaying loans currently you need to stay abreast of the situation so you know what may happen with student loans in the coming years.
An End to Public Service Loan Forgiveness
Under the new 2020 budget, President Trump proposes to end the Public Service Loan Forgiveness program. This was a federal program created by then President George W. Bush to forgive federal loans of those who are employed full-time in local, state, or federal positions (after making 120 on-time payments over the course of 10 years).
This would only effect those who take out a new loan after July 1, 2020.
Federal Student Loan Repayment
President Trump has indicated there are too many individuals repaying loans based on income-driven plans. This, according to the President, causes confusion for students. Instead, President Trump would alter the plan to a single income-based repayment plan.
This would be all undergraduate student loans would be capped at 12.5 percent of income. After 15 years of monthly payments all remaining debt would be forgiven (this is five years sooner than the current plan). Graduate loans would be capped at 12.5 percent and after 30 years of monthly payments all debt would be forgiven (this is five years later than the current plan).
Stop Subsidized Student Loans
With the new budget all subsidized student loans would be eliminated. With these loans the federal government pays the interest on federal loans as long as the student remains in school. This means students who are no longer able to take out subsidized student loans would end up owing more as the interest the federal government had paid would add up over the several years a student remains in school.
Chances are these changes will not go unchanged (if pass at all). While the president creates a budget Congress needs to pass all appropriate bills. With Democrats now controlling the House of Representatives there will likely be changes within the president’s budget.
If the President’s financial proposal remains, there are a number of potential changes to student loans you may experience. Whatever happens it is important to stay on top of the current budget proposals and how it may or may not affect your loans.
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