It seems like Mr. President is all set to create what he has promised – Make America Great Again. With this pledge, Donald Trump is ready to save the country from drowning in the student loan debt of $1.3 trillion.
He has done some new additions to the existing student loan debt repayment plans, which would reduce the debt burden from your shoulder. So, keep reading to know about the proposed changes and how it’ll help you save money at the same time.
The Plan: An overview
Trump’s student loan debt repayment plan doesn’t differ much from Obama’s student loan forgiveness program. But, let us hope that this plan might help people manage their student loan debt efficiently due to decrease in time of the student loan debt cancellation.
Now, check out Trump’s plan on student loan debt forgiveness:
- Student loan borrowers have to contribute 12.5% of their income on their student loan for 15 years.
- After 15 years, the remaining loan amount will be forgiven.
- Combine all ongoing repayment programs into one Income-Based Repayment Plan (IBR).
- He plans to replace federal student loan with loans from banks and other financial institution.
- He promises to downsize the funding for the Department Of Education (DOE).
- He doesn’t want the government to make money from student loans.
- He’ll make colleges to cut back tuition fees by lowering high administrative fees.
- He wants to penalize schools if their students default on their loan payments.
- He proposes to abolish university’s tax-exempt status on endowments if they don’t come up with affordable degrees programs.
What Trump did not mention
Trump’s student loan debt repayment program looks interesting. Isn’t it? But, he has not mentioned anything about tax exemption of the forgiven student loan debt amount; or, stated anything about whether or not he would reduce the interest rate on student loans.
Well, as of now, nothing has been mentioned in detail by Donald Trump about his student loan repayment policy. So, we have to just wait and watch what surprises he has in store for the borrowers.
Comparison of Trump’s student loan debt repayment plan with that of Obama
As long as Trump is polishing his student loan program, let’s compare his plan with that of Obama’s student loan debt forgiveness plan.
- On repaying student loan
Trump: Borrowers have to pay 12.5% of their income toward their student loan for 15 years.
Obama: Borrowers had to pay 10% of their income on a student loan for 20 years.
- On forgiving student loan debt
Trump: After paying continuously for 15 years, the student loan debt will be forgiven.
Obama: Student loan borrowers had to wait for 20 to 25 years to have their student loan debt canceled.
- On tax exemption for the forgiven debt amount
Trump: Up to now he did not say anything about tax exemption on the forgiven student debt amount.
Obama: Forgiven student loan debt amount was highly taxable under President Obama.
How Trump’s student loan repayment plan is beneficial for your pocket
Though student loan borrowers have multiple debt relief options, still the current student debt amount in the country has crossed the $1 trillion mark. It has even crossed the amount of credit card, mortgage, and car loan debts in the nation. So, as you can see people are finding it hard to strike a balance between repayment of student loan and other financial obligations.
But, no more! As per Trump’s proposed changes in the student loan repayment plan, the student loan debt crisis may be reduced to zero. Moreover, borrowers will also be able to save money with this plan. How? Read on to know more:
1. Save money with single repayment program and shorter forgiveness duration
We know that Trump wants to combine all the current repayment programs into a single income-based repayment plan. He also has plans to shorten the loan forgiveness period from 20 years to 15 years. Though the percentage of monthly loan payment amount has grown from 10% to 12.5%, yet you can save a lot in the long run.
If you want to get rid of your student loan debt immediately, you can enroll in the present income-driven repayment plan. But, if you’re in no hurry, then wait for some time to see what the new government comes up.
2. Stay updated on your student loan repayment and save your dollars
If you stay current on your student loan payments, you’ll have more options at your disposal. According to the upcoming rules, if you continue paying the monthly loan amount for 15 years, then after that time, the remaining loan amount will get canceled. So, you don’t have to make further payments on your student loan. You can then use that money toward other necessary things.
3. Save money on college costs
Trump wishes colleges to cut back their tuition costs by reducing their high administrative fees. If this comes into effect, students might not have to take out a student loan to cover their college costs. It plan will prevent students from incurring further debt. Thus, individuals could save more dollars to meet other essential needs.
All said and done, I think that student loan borrowers will surely be benefited with the new federal government’s student loan repayment plan. You just have to be patient and wait for what’s coming your way.