With President-elect Trump taking office in January, everyone is wondering about his plans for a variety of issues. One of those issues is what the student loan plan will look like under Trump. Do you know what a trump presidency means for your student loan debt? How it will compare to the existing plan under President Obama?
Drowning In Debt
It’s no secret that student loans were a hot topic during the election – and with good reason.
Wages for an average recent college graduate employed full-time have gone up just 1.6% in the last 25 years.
On the other hand, student debt for a typical graduate of a Bachelor’s degree program has risen 163.8%.
This comes from an analysis of data from the Education Department by Mark Kantrowitz, an expert in financial aid, and Brad Hershbein, an economist at the W.E. Upjohn Institute for Employment Research.
What’s The Plan?
Many students find themselves in a debt crisis post graduation. So it should come as no surprise that everyone is wondering how President Trump will handle student loans:
- How will Trump’s plan compare with President Obama’s?
- Will Trump come up with a viable repayment plan?
- Are there plans to cut college costs?
Not So Different After All
The specifics of Trump’s student loan plan remain to be seen. But, he did drop some hints during his campaign regarding his intended changes to the student loan system. Surprisingly, it’s not all that different from Obama’s current plan.
Trump indicated he would bring a limit of 12.5% of the borrower’s income for the federal student loan payments for up to 15 years, at which time loans would be forgiven. Under Obama’s existing plan, borrowers pay 10% of income for a maximum of 20 years (this is identical to Hillary Clinton’s proposed plan as well).
A Closer Look
Although the big picture outlined in Trump’s plan is similar to the student loan plan under Obama, there are many other facets of any student loan plan that need to be examined.
Source Of Student Loans
During Trump’s campaign, many ideas surrounding changes to student loans came to light. Among them was privatization, which would turn over the responsibility of student loans to banks and credit unions, as opposed to the federal government.
Additionally, some Trump supporters propose that colleges be required to share in the financial risk of student loans. Some of these ideas include reforms that would have the government offer bonuses to institutions that have the best repayment rates. It would also charge fines to those with the worst repayment rates.
The concept of risk-adjusted interest rates also came up, which would lead to variable interest rates depending on students’ future earning prospects.
Decreasing College Cost
In Trump’s October campaign speech, he stated that he would push colleges to cut tuition rates.
He went on to indicate that the increasing cost of college can be partially attributed to unnecessary administrative costs on campus. He suggests reducing federal regulations so that colleges don’t need to spend so much on compliance – those savings will then be passed onto students.
And if schools decide not to devote additional funds to making degrees more affordable? They’ll face penalties.
For-Profit Colleges
During Obama’s administration, for-profit colleges faced closures and nosediving enrollment rates due to strict oversight and The Department of Education’s “gainful employment” rule. For-profit colleges were required to prove that the preparation they offered students for attaining well-paying jobs was legitimate. The department also recently developed rules to assist borrowers in getting debt relief if they were the victims of fraud by a for-profit college.
In contrast, Trump has indicated that he would reduce those government regulations. This would likely mean less oversight at for-profit colleges. In fact, the day after Trump was elected President, the stocks of some of the larger for-profit schools, including DeVry Education Group, Bridgepoint Education, and Apollo Education Group, were actually trending up.
Impact On The Department Of Education
During President-elect Trump’s campaign, he hit on the federal government’s role in education. Trump has repeatedly called for limiting federal government involvement. Instead, giving the control to local schools. He has even gone so far as to suggest that the Department of Education should be eliminated altogether. According to an excerpt from Trump’s book Great Again: How to Fix Our Crippled America, he indicates that even if the department is not completely eliminated, its power and reach should definitely be cut.
It’s clear that there’s still a lot of work to be done when it comes to student loan plans. There are some strong similarities between President-elect Trump’s proposals and President Obama’s existing plan. But, there is also a potential for some significant changes. In any case, the likelihood that any dramatic changes will occur within Trump’s first 100 days in office is low.
Jeff Noakes says
The quote “Trump has indicated that he would reduce those government regulations. This would likely mean less oversight at for-profit colleges.”is not a favorable idea if they are only concerned about money and not providing a real education and preparation for employment..
Over-site should be for the students education not so much based for profit
The quote”For-profit colleges were required to prove that the preparation they offered students for attaining well-paying jobs was legitimate. ” is reasonable over-site, but the government may not be the best at looking out for the students..
Its sad it is really where the money goes or is wasted, and not about how much it makes a difference or contribution for or society as a whole.It is important that each institution remain solvent and
JSMES H LOWE says
Very informative, keep me up to date !
James H LOWE