At Donald Trump’s latest budget, assistance for low-income students and a program that provides assistance to public service workers are on the chopping block.
The $4.89 trillion plan, presented to Congress Monday, would cut the Department of Education budget by $5.6 billion, bringing savings by cutting some subsidies, cutting the maximum amount of others. freeze and shift some payments from the government to borrowers.
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A few suggestions could help those who are having a hard time repaying their loans.
The spending plan has been criticized by Democrats who control the House and has little chance of taking effect when the new fiscal year begins in October.
“Most of these changes have been seen by the Trump administration in the past four years,” said Antoinette Flores, director of postsecondary education for the Center for American Progress. “But we’ve also seen … both the House of Representatives and the Senate overwhelmingly reject these ideas. So the reality that this is actually happening is small.”
If the plan is approved, borrowers could be saddled with billions of dollars more in debt payments.
Abolish student debt forgiveness?
The Trump administration is proposing to scrap a program that will cancel the remaining student debt of teachers, firefighters and others in public service who have paid off on time over 10 years.
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“Ultimately, it means higher debt,” Flores says, resulting in $52 billion in additional payments for borrowers over a decade.
The possibility of the program being eliminated worries Kelsey Hubbard, 26, an English teacher in Russellville, Arkansas. She sees the program as a financial lifeline.
“I already budget every cent I make as a teacher, so … not having to make that payment would be great,” says Hubbard, who has about $35,000 in student loans. ‘Those are messages. That is natural gas.”
Hubbard learned about the program when she was in graduate school and continued to hear about it from colleagues once she started teaching.
“It’s talked about a lot and it’s used,” she says. “We don’t get paid much, but after 10 years you have this safety blanket. It would take the burden off.”
No more subsidized Stafford Loans?
The federal government pays the interest on certain state loans, called Stafford loans, while the student borrowers are in school.
Trump’s budget would lose that grant and add several hundred dollars to what a student has to pay back. It would amount to $18 billion in additional costs for borrowers over a decade.
“There’s no question that students… would owe more when they graduate,” said Sandy Baum, senior fellow at the Urban Institute’s Center for Education, Data, and Policy.
It is doubtful that the disappearance of the grant will become a deal breaker for people who want to go to college.
“If you ask a student, most have no idea whether their loan is subsidized or not,” Baum says.
Abolish additional subsidy?
The proposed budget would do away with federal additional education opportunity.
Trump’s plan says the student grant is a copy of Pell Grants, the primary federal grant program for low- and middle-income students.
There were 8.2 million students who received Pell Grants in fiscal year 2019, compared to 1.7 million who received money through the Supplemental Scholarship Initiative, according to the Federal Student Aid office of the U.S. Department of Education.
“We’re talking about a very small program where students get on average a few hundred dollars … not the few thousand dollars they get from a Pell,” Baum says.
Still, it would be a loss for the 84% of recipients who only pay for school, according to the Center for American Progress, or whose families earn less than $30,000 a year.
“If you’re talking about cutting subsidies, it will eventually lead to higher loans,” says Flores.
Limits to borrowing?
The Trump administration is proposing limits on how much parents of students can borrow from the federal government to pay for their school. It wants to put a limit on the amount graduate students can take out in federal loans.
Through the Parent PLUS Loan Program, parents would not be able to take out more than $26,500 in loans to pay for their children’s undergraduate education. Students whose families reach that threshold can borrow up to $57,500 themselves.
Those in graduate school could borrow up to $50,000 per year and no more than $100,000 in their lifetime.
“In my opinion, that’s perfectly reasonable,” Baum says. “There’s no reason the federal government should lend such large amounts of money to parents who could ruin their lives because they can’t afford to pay it back.” ‘
Students in expensive graduate programs like medicine may need to take out private loans to close the gap between the federal aid they receive and the tuition they owe, Flores says.
Income Refund Program
Another proposal could help borrowers better manage their debts. It would automatically enroll those who have not paid their loans into an income repayment program.
Five separate options that determine how much borrowers pay based on their income would be consolidated into one plan.
Then, “to further improve and simplify loan repayment, the (Budget) proposes to automatically enroll severely delinquent borrowers in the single… plan,” the Ministry of Education said in a summary.
“That’s a good change,” Flores says, “but doesn’t make up for some of the cuts.”
Follow Charisse Jones on Twitter @charissejones
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