A student-loan forgiveness program for public servants could be on the chopping block, government funding for low-income students who work campus jobs could be slashed and students attending short-term career focused programs could be eligible for government grants.
These are just some of the White House’s proposed changes to the student-loan system released this week as part of the President’s fiscal year 2020 budget.
It’s unlikely these pitches will come to fruition. White House budgets are largely political documents outlining an administration’s priorities. Still, the plans provide a window into the approach the administration brings to college affordability and student debt.
Like earlier higher education proposals from the White House and Congressional Republicans, the 2020 budget plan prioritizes cutting and streamlining higher education and student-debt programs as a way to save money.
Like earlier higher education proposals from the White House and Congressional Republicans, the 2020 budget plan prioritizes cutting and streamlining higher education and student-debt programs as a way to save money.
But the proposed cuts — to the tune of $207 billion over 10 years — are likely to be a non-starter with student advocates and congressional Democrats, who worry that slashing funding sources for low-income students or eliminating options for loan forgiveness will make it harder for students and borrowers to afford the cost of college amid the nation’s $1.5 trillion outstanding student debt.
“The Trump administration tried it last year, they’ll get about as far again this year,” Robert Kelchen, a professor of higher education finance at Seton Hall University, said of the White House’s approach to higher education. “Now that the Democrats are in control of the House it will never happen.”
Here are some of the higher education proposals the Trump administration released this week:
Eliminating Public Service Loan Forgiveness
As part of the budget the White House proposed eliminating PSLF, a program signed into law in 2007 that allows borrowers who work in government and some nonprofits to have their loans forgiven after 10 years of payments.
This marks one of a few instances the Trump administration has floated the idea of eliminating PSLF; the first time officials proposed slashing the program sowed panic among teachers, social workers and others who are relying on PSLF to manage their debt.
About 28,000 borrowers were part of the first cohort of borrowers to apply to have their loans forgiven under the program and just 96 actually had their debt wiped away — a rate of less than 1%.
Challenges implementing the program already have borrowers skittish. About 28,000 borrowers were part of the first cohort of borrowers to apply to have their loans forgiven under the program and just 96 actually had their debt wiped away — a rate of less than 1%. Borrower advocates say a combination of too-complex requirements and student-loan companies sowing confusion about them are to blame for borrowers’ challenges accessing PSLF.
Still, borrowers likely don’t have to worry about the program being eliminated any time soon. Getting rid of the program would require an act of Congress and its something Congressional Democrats are loathe to do. Even if lawmakers were to move forward with Trump’s proposal it would apply only to new student loan borrowers taking out debt after July 1, 2020.
Changes to student loans
Right now, federal student-loan borrowers can choose from several plans to repay their debt, including a suite of income-driven repayment plans that allow borrowers to pay off their loans as a percentage of their income.
Under the current system, borrowers using an income-driven plan put either 10% or 15% of their monthly discretionary income towards their student loans and have the option of forgiveness after either 20 or 25 years.
The White House proposal combines all of the income-driven plans into one option where borrowers pay 12.5% of their discretionary income for up to 15 years if they only have undergraduate debt and up to 30 years if they have graduate debt. This plan is similar to what then-candidate Trump proposed on the campaign trail.
The budget also floats eliminating subsidized student loans, a type of federal student debt where interest doesn’t accrue on the debt while students are in school. Subsidized loans are issued to borrowers on a sliding scale based on income, and so eliminating them would make repaying student debt more costly for low-income students.
The Trump administration proposed cutting in half funding to work-study, which provides federal financial-aid dollars to students working certain campus jobs.
Cuts to work-study and other on-campus aid programs: The Trump administration proposed cutting in half funding to work-study, which provides federal financial-aid dollars to students working certain campus jobs. The White House also requested to change work-study so that the jobs funded under the program are more clearly connected to students’ careers (though the budget provides little detail on how that would work).
In addition, the Trump administration proposed changing the formula the Department of Education uses to allocate work-study funds to colleges. The higher education community has been critical of this formula, arguing that it benefits colleges that have been in the program the longest, not necessarily schools with the most students who could benefit from a work-study job. But they’re unlikely to support any changes to the work-study funding formula that involves cutting money from the program, Kelchen said.
The White House is also proposing to cut the Supplemental Educational Opportunity Grants program, which provides funding for low-income students to pay for college. The Trump administration has floated the idea of cutting SEOG before — a non-starter for borrower advocates.
Expanding Pell grant funding to short-term programs:
The White House is also arguing in favor of expanding the Pell grant, the money the government gives low- and middle-income students to pay for college, to short-term, career-training programs.
The proposal, which has been circulating among policymakers over the past several months, is controversial. Proponents argue that the Pell grant program should include programs that more directly prepare students for careers. But critics worry that opening up the Pell grant to these types of programs could boost low-quality initiatives offered by for-profit providers that do little to prepare students for careers.
The White House is also arguing in favor of expanding the Pell grant, the money the government gives low- and middle-income students to pay for college, to short-term, career-training programs.
Risk-sharing: For years, policymakers from both sides of the aisle have argued in favor of the idea that colleges should be held accountable when their students struggle to repay their student loans — after all, taxpayers and borrowers are already on the hook.
The White House budget also proposes requiring colleges that receive federal financial-aid funds to participate in some sort of student-loan risk-sharing program. While risk-sharing theoretically has bipartisan support, many of the thornier details involved in implementing it — like figuring out how to hold colleges accountable for their students’ loan performance without discouraging colleges from working with students who are already likely to be successful in college — could divide lawmakers, Kelchen said.
“The idea has legs, but I’m skeptical that Republicans and Democrats can come to an agreement on how to do it,” he said.
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