Is Trump student loan forgiveness plan even a thing? The answer is Yes.
Find out what President Trump’s Tax Cuts & Jobs Act and his 2020 budget proposal mean for student loan forgiveness and repayment options.
Back in January 2017, when President Trump took office, a lot of student loan borrowers pondered on how their loans would be affected by the administration’s policymaking. Later in 2017, Donald Trump announced new legislation that would authorize many student loan changes in 2018 and beyond.
Referred to as the Tax Cuts & Jobs Act of 2017, the legislation was passed on November 16th, 2017 by the U.S. House of Representatives, and then was signed into law by President Trump right before the year ended.
Since the legislation has been put into law, and President Trump’s budget having been released to the public, you may have questions on how the Tax Cuts & Jobs Act will impact student loans, as well as how Trump’s budget affects student loan forgiveness options down the road.
Find out how the Tax Cuts & Jobs Act and President Trump’s budget could impact student loans by filling out our free online form or speaking to a student loan specialist directly at CALL US NOW.
How the Tax Cuts & Jobs Act Affects Student Loan Borrowers
The Tax Cuts & Jobs Act experienced several changes before getting signed into law. Here are some of the proposals that were part of the original bill, along with information on whether or not they were included in the last revision.
American Opportunity Tax Credit
The American Opportunity Tax Credit was formerly signed into law by former President Barack Obama as part of the American Recovery and Reinvestment Act of 2009. In 2017, President Trump looked to better student tax credits as part of the Tax Cuts & Jobs Act, with one of them being the American Opportunity Tax Credit.
Basically, the act would have allowed qualified borrowers to apply the same $2,500 deduction to their taxes for the first 4 years of college, along with an extra $1,250 for the 5th year of eligibility. But, before the act was signed into law, this provision was taken away from the legislation.
Lifetime Learning Credit
The Lifetime Learning Credit offers qualified students a tax credit of up to $2,000 per year to help with tuition and college-related expenses while enrolled at an eligible educational institution. Unlike the American Opportunity Tax Credit, the Lifetime Learning Credit can be used every year you attend college, as long as you and your school meet eligibility requirements.
Even better, as part of the Tax Cuts & Jobs Act of 2017, student loan borrowers will still have access to this valuable yearly tax credit to help pay for college expenses after it was eradicated from the final document signed by the President.
Student Loan Interest Deductions
The elimination of interest deductions on students loans in 2018 is also one of the expected change from the Tax Cuts & Jobs Act. Presently, more than 12 million American take advantage of these deductions per year.
While the student loan interest deduction measures were ultimately gotten rid of from the final tax bill, many borrowers fear it could become an issue later on, when new legislation is issued.
Graduate Tuition Waivers
One huge advantage of attending graduate school at some universities and colleges is the ability to work on campus in exchange for a graduate tuition waver. This allows students to continue with their studies, while waving all or some of their tuition waived as long as they meet certain requirements.
While the IRS hasn’t considered tuition waivers as taxable income in the past, the Tax Cuts & Jobs Act sought to change that by having the IRS look at these waivers as completely taxable. But, a coalition of lawmakers did not agree with the measure, and had it removed before the final tax bill was signed into law.
Lock in your ideal student loan repayment or forgiveness program now by filling out our free form or getting assistance from a student loan specialist by phone at CALL US NOW .
How President Trump’s 2019 Budget Proposal Could Affect Student Loans
In February 2018, President Trump released his budget proposal for the next fiscal year of 2019. In the budget, President Trump focuses on reforming 3 existing student loan programs that include income-driven repayment plans, the Public Service Loan Forgiveness (PSLF) program, and subsidized student loans. Here’s how each of these programs could be affected in 2019.
All of these together are what makes up the Trump student loan forgiveness plan.
Income-Driven Repayment Plans Under Trump’s Budget
Today, student loan borrowers have access to a variety of income-driven repayment plans that provide a wide selection of payment benefits and options. As they stand now, they can be termed as Trump student loan relief because these benefits include having monthly payments capped at 10% of discretionary income, as well as loan forgiveness after 20-25 years of qualified payments.
These plans include:
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Revised Pay As You Earn (REPAYE)
- IBR for New Borrowers
- Income-Contingent Repayment (ICR)
To help determine repayment options for new borrowers, President Trump’s budget comes with a provision that would terminate most, if not all of the repayment plans currently available. Instead, borrowers would have one repayment option that caps monthly payments at 12.5% of discretionary income and reduces the length of time it takes to have student loans forgiven to just 15 years.
However, while student loan payments for undergraduates may be higher under Trump’s 2019 budget proposal, they can also obtain forgiveness five years earlier than in other income-driven repayment plans.
The End of Public Service Loan Forgiveness
As of today, the Public Service Loan Forgiveness (PSLF) program gives non-profit and public sector employees who qualify for the program the ability to have their student loans forgiven after they’ve made 120 on-time, consecutive monthly payments.
How will President Donald Trump’s budget impact Public Service Loan Forgiveness? Instead of simplifying or modifying the program, Trump would eliminate the PSLF program completely, in the hopes that it would save taxpayers anywhere from $100 to $200 billion annually.
One thing to note, but, is that the PSLF program was created in 2007 by an act of Congress, so it would require a second act of Congress – or a bill being passed on Trump’s 2019 budget for higher education – to have it removed as a student loan forgiveness option.
Subsidized Student Loan Reforms
Essentially, anyone who is approved for federal student loans from the U.S. Department of Education receives a subsidized loan. One of the advantages of these types of loans is that they won’t increase interest while the borrower is attending school full-time, and payments only start after the borrower has left college to pursue a career or other interests.
If President Trump’s budget proposal is brought to live, it may seem that subsidized loans would be done away with fully; meaning any new federal student loans being issued would start building interest from day one.
People who support this proposal believe the advantages surpass the cons, pointing out that not only would borrowers earn Trump student loan relief earlier than with existing loan programs, they would also be off the hook for origination fees as part of the Trump administration’s PROSPER Act. Critics, however, claim the accruing interest would negate these benefits by increasing the cost of college for people who already face income-related challenges.
For now, Trump’s budget is still a proposal, so it may be adjusted heavily before any changes to student loans in 2019 occur. Only time can tell if these plans will be put to action and ultimately hurt or help student loan borrowers down the road.
A Complete List of Trump’s Student Loan Forgiveness Changes & Amendments:
In this section, you’ll discover the latest information and news on changes to Trump veteran student loan forgiveness plans.
Public Service Loan Forgiveness (PSLF) Program
In a surprising move by the White House, President Trump signed the $1.3 trillion omnibus spending bill, which has $350 million allocated specifically for the Public Service Loan Forgiveness (PSLF) program.
Not only will the DOF (Department of Education) receive funding for the PSLF program, but the bill also provides borrowers who were ineligible for the program in the past the ability to apply. This includes borrowers who have extended or graduated repayment plans, versus the income-driven repayment plans that were the only forms of loans available for the program in the past.
Now operating on a “first-come, first-served” basis, the PSLF program will be accepting new applications over the next 6 months as funds become available to the Education Department and is then dispersed to borrowers.
If you’re a student or someone who may qualify for the PSLF program, contact us for a free assessment and assistance in processing your application immediately.
PSLF Program Update
Being part of the $350 million in funding allocated for the PSLF program, the Department of Education announced a new temporary program for borrowers denied PSLF approval. Popularly known as the Temporary Expanded Public Service Loan Forgiveness (TEPSLF), this new program helps borrowers whose loans didn’t qualify for PSLF earn the same advantages as the original PSLF program.
Learn more about TEPSLF in our recent Trump student loan forgiveness plan. If you’ve had your PSLF application rejected as a result of your loan type (s_, you should fill out our free online assessment or speak to a loan expert immediately ON HERE before funding for TEPSLF runs out.
Total & Permanent Disability (TPD) Discharge
In 2018, the month of April witnessed the Department of Education announced a partnership with the U.S Department of Veterans Affairs, Working together, the 2 agencies plan to simplify the Total and Permanent Disability (TPD) Discharge program by notifying disabled veterans who likely qualify for the program to sign up.
The TPD Discharge program offers disabled veterans – and other disabled borrowers who qualify – the chance to acquire forgiveness on most federal student loans, including Federal Perkins Loans, Direct Loans, and Federal Family Education Loans (FFEL).
Another change to the TPD Discharge includes making any balances forgiven through the program untaxable by the IRS. Before this new initiative, anyone who was approved for the program would be required to pay taxes on the forgiven amount the following year. Currently, disabled veterans can get rid of their student without the tax burden, and save even more money through the program.
In August 2019, President Trump signed an executive order aimed at streamlining the TPD Discharge program for disabled veterans. Trump veteran student loan forgiveness is available for disabled persons.
This new move is better than the past work carried out by the Department of Education on behalf of veterans and active military by automatically approving eligible service members for a TPD Discharge. The goal of the executive order is to make sure Trump forgive student loan debt to more than 25,000 qualified veterans who have yet to receieve approval.
Please visit our Permanent Disability Discharge section for more information.
What Should Borrowers Do Today?
As a borrower, it is expected to be concerned about these changes. However, there are a couple of things that you can do today to at least be prepared, if not proactive.
First, make sure that you know what programs you’re on with your student loan debt. You should also understand your repayment plan, know your forgiveness program if you’re aiming for it, and know your options.
Second, you should make sure that you’re current on your loans and not in student loan default. If you are, check out rehabilitating your student loans as soon as possible to get on track. If Trump does change student loan repayment plans, it could be harder for you if your loans are in default.
If you’re not sure about either of these, consider checking out our free Loan Consultation. You can also consider professional help. Keep in mind; you can do everything with your Federal loans for free at StudentLoans.gov.
It can be scary to envision all these different student loan forgiveness programs and student loan repayment plans changing.
But, plans have changed before, and they will again in the future. Trump student loan forgiveness plans and proposals look monstrous, but they are currently only going to apply to future student loan borrowers. Because of this, if you have student loans today, you should take action and begin making progress on them right away.