The election results are in. And students are wondering if President elect Donald Trump will be able to save them any money on their student loans. So, will Trump’s student loan plans save you money? Let’s take a look at what Trump intends to do.
Debt Continues To Rise
Student debt is nothing new. However, over the past several years, the amount of money borrowed for college has skyrocketed. Especially in regards to federal student loans.
Source: CNBC
Students are left wondering if Trump’s plans will include an easier path to repaying loans. As well as if there are proposals to lower the cost of college altogether.
Current Student Loan Plans
Currently, there are several options available for student borrowers offered by the Department of Education.
The most common of these options is the income-based repayment plan, which lets borrowers cap payments at 10% of their income. Then any balance remaining is forgiven after 20 years. Enrollment in income-based repayment plans rose to 20% in 2016, quadrupling from 5% in 2012.
Trump’s Income-Based Repayment Plan
According to Trump’s proposals during his campaign, he intends to simplify the federal student loan programs available. He will continue offering an income-based repayment plan, not all that unlike the current plan under President Obama. If anything, Trump’s proposal may end up saving money for students. Specifics of the plan:
- Borrowers will pay 12.5% of their income
- Debt will be forgiven after 15 years
(Bonus Tip: Love him or hate him, Trump’s plans WILL change repayment plans for student loan borrowers. But don’t sweat it! We’ve mapped out the easy way to stay on top of the best option for you with this 8-plan Cheat Sheet so you can always know you’re in the best plan. Click here to learn more and get the free cheat sheet.)
Will The New Plan Save You Money?
Generally speaking, with an income-based repayment plan, borrowers with larger amounts of debt benefit the most. However, low-income borrowers may also see benefits under Trump’s new plan.
Consider the example of a borrower with $70,000 of federal student loan debt with an interest rate of 5.5% and earning $50,000 annually. Under the current plan, this borrower would pay around $89,600 across 20 years.
The same borrower would only end up paying $76,800 under Trump’s repayment plan (over a 15 year period)
Cutting Costs
In the above scenario, Trump’s proposed plan is clearly beneficial to the borrower. Repaying student loans based on income is logical: it helps to make sure payments are going to be manageable. If you have no or very little income, payments will be lower. But is that enough? Trump doesn’t seem to think so.
Another point of focus during Trump’s student loan discussions has been bringing down the cost of college tuition altogether.
Decreasing Federal Regulations
Trump has suggested that giving assistance to those buried in student debt is just one part of the puzzle in solving the student debt crisis. He indicated that the federal government needs to make an effort to bring the skyrocketing tuition costs to a halt. Trump stated that as President, he would take the necessary steps to decrease college costs. One way he proposes to do this is by reducing unnecessary federal regulation compliance costs and then passing those savings on to students.
Holding Colleges Accountable
Trump also contended that colleges themselves are not doing nearly enough to make higher education affordable, despite receiving billions of dollars in endowments. While campaigning in October, Trump iterated his call for action in holding universities accountable for how they spend endowments. He stressed that more needs to go toward spending that will impact students directly versus spending an excessive amount on administrative costs.
Furthermore, Trump commented that holding colleges accountable to these standards may involve reconsidering if those with large endowments should keep them tax-exempt. As well as pulling federal funding from colleges that don’t do their part in lowering tuition costs.
While the specifics of the future of student loan plans are still somewhat unknown, it’s clear that President-elect Trump does have proposals in mind to ultimately save students money by:
- Focusing on a simple income repayment plan
- Reducing federal regulations to save colleges money (passed onto students)
- Holding colleges accountable for doing their part in reducing tuition costs
Kim luskKi says
I’m a disabled veterns with student loans and I am unable to work now and I have no income now and my husband doesn’t make much either how does that work for someone like me.
Dawne Weida says
If the college or colleges are at fault for student loans. Then they need to be forced to pay the money back to the student or students.
Also I have 4 student loans that need to be consolidated into one loan in order to get financial aid in order to restart school or to finish what I started. My question is…. Will trump’s plan help students with this? Or will it be other say but nothing coming out of it?
Katie Bentley says
Hey Dawne,
Great question. The better news is that you can already get this done with the current student loan plan. Since Trump’s plan seems to be only enhancing the current plan under Obama (in terms of benefits for borrowers), there should be no change to this.
You can get a consolidation done directly through the DOE (be wary of this… it’s easy to make mistakes) or this one of the main services we offer here at USSLC. Just this past year we’ve been able to help over 15,000 borrowers and consolidate over $1.3 Billion. Feel free to go here to get help: https://usstudentloancenter.org/free-consultation or give us a shout at 877.433.7501
Lillian Irizarri says
I have parent plus loans. Will anything be done to help those with this type of loan.
Curt Smith says
I want to know if their is forgiveness singing for a lone in 2011 for food and boarding for 4 yars my daughter was kick out the school in 7 mounths. I am still paying great lakes this lone. The school nor the loner wont give me copy of the lone with my signature. Can somebody help me.my name is curt smith.
Carla Dubis says
Hi Curtis, Carla over here…
The best way to find out if you qualify for public service loan forgiveness or any other kind of student loan repayment program which can drastically reduce your monthly payments, would be by getting in touch with one of our expert student loan counselors by dialing 877.433.7501 at your earliest convenience,and discussing your individual case with them. They will ask you a few questions to get more information about your case and will be able to guide you in the right direction. Loan forgiveness is very tricky, there are many loopholes and requirements, mainly having to do with your current type of employment… and your best bet is to talk to a trusted representative that will be able to navigate all the complicated requirements and regulations, and assist you with the qualification process. Please call us at 877.433.7501 whenever you can to get started.