The Trump administration has proposed several changes to student loans. Wondering whether it will impact you? Here’s a closer look at what to expect.
Big Changes Ahead
For many borrowers, student loan forgiveness is a promising light in the dark. However, this forgiveness isn’t actually “free.” Rather, it’s absorbed by taxpayers -- but not if US Secretary of Education Betsy DeVos has anything to say about it. On the chopping block in Trump’s 2019 budget is the Public Service Loan Forgiveness plan.
The good news is that if you are already a participant in Public Service Loan Forgiveness or an income-driven repayment plan, you are safe. However, if this is something you are hoping to take advantage of in the future, you may want to make other plans.
Speaking of federal income-based repayment programs, Trump has also proposed merging all such plans into one to minimize borrower confusion. According to NerdWallet, this may mean borrowers will end up paying more each month for their federal loans. At the same time, this may result in a faster path to loan forgiveness, albeit with a potentially significant tax bill at the end.
Lastly, Trump also wants to involve more private sector lenders in the student loan process thereby steering the onus of student lending away from the government.
More Flexibility for Families?
Trump’s tax plan also affects how families can use 529 plans. Once solely designated for college, recent changes not only allow for funds to pay for K-12 private school tuition, but also for homeschooling, apprenticeships, and even student loans.
According to CNBC, the change may have the added benefit of increasing awareness about the benefits of 529 plans. Mark Kantrowitz, publisher of savingsforcollege.com adds, “Anything that provides families with more flexibility in how they use 529 plans would be beneficial.”
That said, not everyone agrees that allowing people to use their 529 plans to cover student loans is likely to have any real impact. American Council on Education director of government relations, Steven Bloom, suggests, “If you’re wealthy enough to have a lot in your 529, you’re probably not going to have student loans."
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