Trump's Proposed Budget Includes 3 Student Loan Reforms

As the president's budget for fiscal year 2019 is released, the administration's priorities are clear. Here's what they may mean for higher education.

by Susan Gentz / February 15, 2018 0
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The president’s official budget was released Feb. 12 and includes a number of proposals that could impact students who rely on loans.

According to Forbes, “The budget maintains three principal student loan reforms from last year: reforming the income-driven repayment system, eliminating loan forgiveness for borrowers in public-service jobs and eliminating subsidized student loans. Though estimates vary, these changes are likely to save several billion dollars per year.”

One proposed reform speaks directly to the income-driven repayment plan. Currently, if a borrower is using this plan, they received forgiveness after 20 years of successful payment on the loan (usually somewhere around 10 percent of the borrower's income). Under the new budget proposal, borrowers would need to pay 12.5 percent of their income, but would receive forgiveness after 15 years for undergrad and 30 years for graduate borrowers.

The second proposed reform would eliminate the category of loans that do not accrue interest while a borrower is still enrolled in school, while the third eliminates the public-service loan forgiveness (PSLF), which allows those working for the government to have loans forgiven after 10 years of service. According to the administration, PSLF unfairly favors some career choices over others and is complicated for borrowers to navigate. 

Also according to the administration, “the budget proposes to eliminate the Public Service Loan Forgiveness (PSLF) program and focus assistance on needy undergraduate student borrowers from all professions.” Essentially, they are trying to cut loans in one area to increase funding in others. 

A Brookings analysis found that “typical undergraduate-only borrowers would pay less in total on their loans than they do under current law, largely because they are eligible for loan forgiveness five years earlier. Graduate students, in contrast, would pay significantly more over the life of their loans.” 

Finally, the budget also proposes to cut the Strengthening Institutions Program (SIP). This program, authorized under the Higher Education Act, aims to support historically black colleges and universities (HBCUs) and minority-serving institutions (MSIs). The administration states that “SIP is duplicative of the other Title III and V programs that provide program funding for institutional support activities. The budget would preserve funding for programs that support HBCUs, consistent with the president's executive order on HBCUs, and streamline funding for MSIs.” This would eliminate $87 million in the budget. 

The Trump administration claims the budget would save more than $203 billion overall, while the Congressional Budget Office says it’s more likely $100 billion. Either way, only Congress has the power to decide what stays and what goes in this budget proposal.