What You Can Do For Your Country Act
While Trump is angling to eliminate PSLF, Sens. Tim Kaine, D-Va., and Kirsten Gillibrand, D-N.Y., as well as other Democratic senators, are looking to improve the program.
Here are a few key highlights from the What You Can Do For Your Country Act that was proposed in April 2019.
- Forgive 50% of student loan balance at five years: This would be a huge change, as currently it takes 10 years to earn PSLF forgiveness. With this plan, borrowers could have half of their balance forgiven at the five-year mark.
- Count pay ahead payments toward PSLF: This would keep you from being penalized for trying to do the right thing and paying more than you have to.
- Count all types of federal student loan: Its unclear exactly what this would mean. But Democrats want Federal Family Education Loan Program Loans to qualify for PSLF.
- Eliminate the need for income certification: With this plan, every payment would qualify for PSLF. Therefore, there would be no need to annually certify your income.
- Allow self-certification of public service employment: If your employer refused to sign your certification form, you could certify your employment yourself.
- Make 30 hours a week the clear definition of full-time employment: Currently, full-time employment is considered to be 30 hours or whatever your employer considers full-time. With this change, your employers definition would no longer matter.
How does Kaine and Gillibrands proposal compare to Trumps?
Trump Vs Biden: How Their Plans For Student Loan Debt Compare
Americans with student loan debt have a $1.6 trillion question on their minds: What would President Trump or a President Biden do about all that money these 45 million borrowers owe?
And what are the chances either would forgive their debt?
Okay, thats actually two questions, each worth $800 million.
We wont really know the answers until well after the presidential election, but both candidates have signaled increased student debt relief is on the way.
Thats good news if youre one of the people whove racked up that $1.6 trillion in student loan debt. The average borrower owes $37,000, which is almost enough to buy a Tesla Model 3.
A diploma is not nearly as much fun to drive, and you still have to make monthly payments. Lets take a closer look at the odds of that debt going away.
Eliminate Public Service Loan Forgiveness
In what was probably Trumps most controversial proposal, he wanted to do away with the Public Service Loan Forgiveness program. The Trump administration argued that PSLF is a mess and gives unfair preferential treatment to public service workers. It said offering 15-year forgiveness to all federal student loan borrowers is a better plan.
In cutting this type of student loan forgiveness, a ton of overhead would potentially be eliminated, as the Department of Education would no longer have to deal with the headache of verifying employment data from PSLF applicants for 10 years.
This repeal would not have affected borrowers currently eligible for Public Service Loan Forgiveness. The PSLF program is explicitly listed as an option in your promissory note if you are an existing borrower. President Trumps plan would affect borrowers who have not yet taken out student loans.
You cannot qualify for PSLF unless you work 10 years at a qualifying not for profit or government employer while making income driven payments.
Approximately 25% of the work force works at a qualifying employer and 53% of borrowers pay their loans on an income driven plan.
$139 billion over 10 years.
What Trumps opponents say
Opponents to the change say that PSLF is needed. They believe the program encourages qualified workers to choose public service professions. Trump is going to have a fight on his hands when it comes to eliminating PSLF. Hes tried before and failed.
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Is This Widespread Student Loan Forgiveness
No. This relief is focused only on students who had attended ITT Tech. President Joe Biden has said hell announce a decision on wider student debt relief at the end of the month. In total, the federal government under Biden has canceled about $32 billion for 1.6 million borrowers.
The action comes as the government has paused payments on federal student loans for the past 2½ years. Interest rates have also been set at zero percent, and collections agencies have stopped their attempts to recoup debts.
That pause, however, is slated to end this month. Biden has yet to say whether he’ll extend the moratorium, though he and former President Donald Trump both extended the pause multiple times.
Trump Vs Biden On Student Debt Cancellation
The Debt Collective, the nation’s first debtors’ union, obtained documents and internal Education Department emails via a Freedom of Information Act request that showed a first draft of the memo titled “The Secretary’s Legal Authority for Broad-Based Debt Cancellation” has existed since April 5. Internal emails suggested it was circulated among White House leadership on the same day, but it first appeared to the public as six pages of pink redactions this week.
The documents also indicated that on April 8 the word “draft” was removed from the header and the memo assumed a new title that referred to the HEROES Act, the law that both Biden and President Donald Trump used to extend the pandemic pause on student-loan payments.
The memo DeVos received on her authority to cancel student debt broadly argued that the HEROES Act, along with the Higher Education Act , did not permit her to cancel student debt.
“Plain HEA language and context strongly suggest Congress never intended the HEROES Act as authority for mass cancellation, compromise, discharge, or forgiveness of student loan principal balances, and/or to materially modify repayment amounts or terms,” the DeVos memo said.
“We don’t even need this memo to know what we know, which is that Biden has the authority to cancel student debt,” Brewington said.
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Trump Student Loan Forgiveness Changes And Proposals
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President Trump made some major changes to student loan forgiveness programs – and most people don’t know it. Combine that with the proposals rolled out by Education Secretary Betsy DeVos, and the Trump presidency was mired with student loan controversy.
Trump Vows To Nix Student Loan Payments Interest Until Further Notice
Trump said Friday that he could sign the orders by the end of the week” and that theyre being drawn by the lawyers right now.
08/07/2020 09:48 PM EDT
President Donald Trump said Friday that he is considering executive action that would defer student loan payments and forgive interest until further notice.
Trump, in remarks from his New Jersey golf club, did not offer any further details about the executive action he has teased this week in response to floundering negotiations between his administration and congressional Democrats over the latest coronavirus relief package.
Following a meeting earlier Friday with Democrats, Treasury Secretary Steven Mnuchin said he would recommend that the president move ahead with the executive actions on student loans, unemployment payments and federal eviction protections.
Trump said Friday that he could sign the orders by the end of the week and that theyre being drawn by the lawyers right now.
Depending how the executive action is written, the policy change could effectively extend student loan relief provided in March under the CARES Act, which suspended payments for roughly 40 million borrowers. Those benefits an interest-free pause on monthly payments are scheduled to expire on Sept. 30.
Congressional Democrats have proposed expanding student loan relief to cover more borrowers and extending the protections for at least another year.
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Loan Companies Want Loan Payments To Restart
Its not just Republicans who want the forbearance period to end, though. Banks and private loan companies, which make money when people refinance their federal student loans into private ones in order to secure interest rates or repayment plans that work better for them, do too. Because federal student loan interest rates were set at 0% and payments were paused during the forbearance period, fewer people converted their federal loans to private ones.
Some of the lenders that would normally make more money off the conversion of federal student loans to private ones increased the amount they spent on lobbying Congress compared to pre-pandemic years. SoFi Technologies, for example, spent $460,000 on lobbying in 2021, according to government accountability watchdog Open Secrets, versus $220,000 in 2018 and $160,000 in 2020.
Right now, theres really no incentive for borrowers to refinance, says a Democratic House aide. Small and large banks are pissed about it.
One Senate aide argues the solution to these problems is clear. Before we resume payments, she says, we need to make sure that theyre resuming payments in a system that works.
Correction, March 29:The original version of this story implied that Sallie Mae refinances federal student loans. It offers private student loans, but does not refinance federal ones.
Trumps Changes To Student Loan Forgiveness
On December 22, 2017, the Tax Cuts & Jobs Act was passed into law. Within the 429-page document, there are changes made to existing laws that significantly affect current students and those with student loans, as well as parents who claim dependents that are still enrolled in college.
Student Loan Discharges No Longer Taxable Income
Section 11031 of the Tax Cuts & Jobs Act prevented student loan discharges through total and permanent disability from being added to the borrowers gross income. Under the new law, discharged student loans are no longer seen as taxable income if the borrower is applying for disability discharge. This is a hugely beneficial change for disabled borrowers who want to apply to have their federal student loans discharged. Previously, many borrowers elected not to apply for discharge and remained in an income-driven repayment plan because they feared being left with a hefty tax bill that they couldnt afford.
American Opportunity Tax Credit Improved
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Elizabeth Warrens Student Loan Forgiveness Plan
Sen. Elizabeth Warren, D-Mass., one of the Democratic presidential candidates, has been very vocal about the student loan problem in America. And shes presented a bold plan to give borrowers relief.
With Elizabeth Warrens plan, the government would forgive up to $50,000 of student debt per individual. The exact amount forgiven would depend on the borrowers income.
Warren says her plan would erase all student debt for 75% of borrowers and would provide at least some relief for 95% of borrowers.
Borrowers with an income of under $100,000 would receive the full $50,000. After that, borrowers would receive less. Her plan caps out completely for borrowers who make $250,000 or more.
She also plans to pass a universal free college program, which would make all two-year and four-year public colleges tuition-free.
Cancel Student Loan Debt
- There have been many proposals in Congress to cancel student loan debt.
- Trump does not support these plans to cancel student loan debt for all student loan borrowers.
- Similarly, U.S. Secretary of Education Betsy DeVos doesnt support widespread student loan debt cancellation.
- Could Trump cancel student loan debt? Its unlikely in a potential second term. However, theres always the potential for a policy change.
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More Borrowers Set To Receive Student Loan Relief From Defense Claims
On June 22, the Department of Education announced a proposed settlement in the class action lawsuit Sweet v. Cardona. About 264,000 borrowers sued the agency, saying it illegally delayed action on longstanding defense claims.
If approved by a judge, the proposed settlement will provide student loan debt relief to students from more than 50 mostly for-profit colleges and significantly reduce the backlog of defense claims that began during the President Donald Trump administration and grew during the Biden administration.
The debt relief proposed in the settlement will only apply to borrowers who have already filed defense claims with the Education Department. The Project on Predatory Student Lending says that all borrowers with pending defense claims as of June 22, 2022, or those who received denials after December 2019 are eligible to be plaintiffs in the class action lawsuit.
It’s not yet known if the Department of Education will expand relief to borrowers who attended the offending schools but have not filed defense claims.
Eliminate Subsidized Student Loans
Currently, some federal student loans dont accrue interest while borrowers are still in school. To qualify for these subsidized federal student loans, borrowers must demonstrate financial need.
If your family income is too high, you can take out an unsubsidized federal student loan. But Trump wants to do away with subsidized student loans altogether.
According to the nonpartisan Congressional Budget Office, Stafford Subsidized loans have a 10.7 percent subsidy rate. Out of $254 billion in issuance over 10 years, this would cost borrowers $27 billion over 10 years.
Again, this is sure to be an unpopular proposal. It also will have a hard time passing both houses of Congress.
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Net Effects For Graduate Students
Comparing the change in benefits for graduate students under the Trump proposal is more straightforward than for undergraduates. It is obvious that the plan reduces benefits relative to the current IBR program because it increases monthly payments by the same amount as for undergraduates, but instead of reducing the repayment period before loan forgiveness, it increases it from 20 years to 30 years. Higher monthly payments and longer terms must result in a reduction in benefits by making it far less likely a borrower would receive loan forgiveness.
We have argued that the changes lawmakers made to IBR in 2010 provided outsized benefits to graduate students relative to the original 2007 version of IBR. While it is obvious the Trump proposal rolls back those benefits, we wanted to know if it would result in a less generous program for graduate students than even the original 2007 version of IBR. That plan set payments higher than the Trump proposal but provided loan forgiveness earlier, after 25 years of payments. Therefore, we include the original 2007 version of IBR as an additional point of reference in our analysis.
Bernie Sanders Student Loan Forgiveness Plan
If you thought Elizabeth Warrens student loan forgiveness plan was extreme, wait until you hear what Sen. Bernie Sanders, D-Vt., has in mind.
In short, he wants to forgive all $1.6 trillion of United States student debt in one fell swoop. Yes, that includes private student loans.
To pay for his plan, Sanders would institute a Wall Street tax. All stock, bond and derivative trades would be charged a small tax under Sanders plan.
Like Warren, Sanders also wants to make college more affordable. His College for All proposal calls for all four-year public universities, tribal colleges, community colleges, trade schools and apprenticeship programs to be free for families earning less than $125,000 a year.
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Cancellation Of Subsidized Federal Loans Of Students
One of the initial nuances in the Trump student loans changes plan is the cancellation of subsidized federal loans. An example of such a loan is Stafford loan.
If you do not know, keep in mind that subsidized loans are the loans on which no interest is accrued due to the financial difficulty when the borrower is in the period of deferment, forbearance, or still in school.
Subsidized federal loans typically cost much less than other loans. As a result, the Federal Government receives almost no revenue from them.
As per me, this change is not that bad. The existence of both subsidized and unsubsidized loans makes it more confusing for students. So the cancellation of it can clear up the situation a little. On the other hand, the main reason for the suffering of students is interest. People pay for ten even 15 years for the accrued interest. Still, they do not reach a point close to finishing to pay off their debt. So, from this viewpoint, the proposed change plan of President Trump does not look likely to benefit students.
Betsy Devoss Doe Announcement That Pslf Approval Letters Arent Binding
In an even bigger slap to the face of student loan borrowers, Betsy Devoss Department of Education announced that the letters sent out to inform borrowers they had qualified for Public Service Loan Forgiveness may not actually qualify them for receiving the benefit after all.
The way that the PSLF program works is that each year, or any time you change employers or positions, you have to submit a form to FedLoan Servicing to prove to them that you really do qualify for the program .
Each time those forms were submitted, FedLoan Servicing has responded with a letter of their own stating in writing that the borrower qualifies for the PSLF program, and that their payments will count toward the 120 payment threshold required to receive complete forgiveness benefits.
But in March, the Department of Education issued some legal filings stating that is has never issued any approvals for participation in the Public Service Loan Forgiveness Program, which means that any letters sent by FedLoan arent legally binding, and that any of your previously approved employers or payments may actually end up not counting toward your 120 payment requirement.
The reality is that now the DOE has given itself the opportunity to retroactively deny any of your payments from counting toward PSLF, and theyve done this just in time too, because the first round of PSLF forgiveness approvals was set to begin in October of 2017.
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