Trump on Student Loan Forgiveness
KEY POINTS: Will Trump forgive student loans?How likely will student loans be forgiven?
Trump’s Tax Cuts & Jobs Act And How Its Effects On Student Loan Forgiveness:
President Donald Trump’s reign as the US president has seen different policies, diverse strategic approaches to governance and obvious changes to the economic status of the country.
Trump’s reign as the number one citizen of the country is characterized by some diplomatic approach to solving issues within and outside the country.
The president has made many decisions that were applauded by we Americans. He had equally made some decisions that leave the citizens with no option but to protest in their numbers since he came into power on the 20th of January 2017.
There are many economic strategies and policies introduced by the 73-year-old during his 2-year-and-11-month old spell in the White House.
Our focus for today is strictly on the president’s Tax Cuts & Jobs Act which was signed into law in 2017; And his budget proposal for 2019.
President Trump’s Tax Cuts & Job Act
Just as every other law, the Tax Cuts & Jobs Act passed through many processes and reviews before it was eventually passed into law by the US legislative arm of government.
The Act or law contained some proposals which were critically reviewed by the US lawmakers before being signed into law. Some of the proposals include:
1. American Opportunity Tax Credit
The American Opportunity Tax Credit was initially signed into law by former US president Barack Obama , and it was included in his American Recovery and Reinvestment Act of 2009.
Knowing how effective this act has been to the citizens of the country, President Trump decided not to eliminate it. Instead, he decided to improve it as he included it in his proposal to the legislature.
In this own proposal, the American Opportunity Tax Credit will give borrowers the chance to see $2,500 deducted from their tax for the first four years in college.
The borrowers will equally see $1,250 deducted from their taxes in the fifth year of their participation in the program.
Unfortunately, the proposal was turned by the lawmakers and it wasn’t included in the Tax Cuts & Job Acts.
2. Lifetime Learning Credit
This is equally included in the initial bill or proposal made by Donald Trump, and luckily, it was legally accepted by the legislative arms of the US government.
The Lifetime Learning Credit ensures that qualified students enjoyed an annual tax credit of $2,000 that will cater for their tuition fee and other school-related expenses throughout their academic programme. However, this benefits is not opened to all students as there is a specific list of educational institutions eligible to register their students for the program.
The most impressive side of the Lifetime Learning Credit is that you stand a high chance of enjoying the tax credit every year you enrolled in college as far as you maintain your eligibility status. Since the proposal was granted in 2017, student loan borrowers are still enjoying the annual credit tax which must be used to settle all school-related expenditures.
3. Student Loan Interest Deductions
Another proposal made by the president in his Tax Cuts & Jobs Act was the cancelation or elimination of interest deductions on student loan in 2018.
This proposal was aimed at ensuring that the interest rate on every amount borrowed by students are being canceled, thereby, students won’t be paying more than the amount they borrowed.
The proposal was also approved but wasn’t effective until 2018, and many students — over 12 million — still benefit from it. However, there are fears that this part of the act could backfire whenever there is a change of government or a change in the country’s economic policy.
4. Graduate Tuition Waivers
This is the final proposal made by the American president in his Tax Cuts & Jobs Act of 2017. This proposal was aimed at ensuring that students in graduate school have their tuition fee been abandoned or waived, though, they will do some minor chores or labor in return.
Students or borrowers will proceed in their studies without paying any tuition fee till the end their academic program. Unfortunately, the proposal was turned down by higher numbers of lawmakers who didn’t share the same view with the president. It was eventually rejected by the whole members of the legislative arm of the government.
Having passed the Tax Cuts & Jobs Act into law before the end of his first year in office, many students were wondering what would happen to the student loan forgiveness program — which they have been enjoying for some years before his administration — in 2017.
Before we proceed to the effect of the Trump’s Tax Cuts & Jobs Act on the student loan forgiveness program, let us quickly unveil some important facts you must know about Student Loan Forgiveness and how to enjoy the awesome scheme.
Student Loan Forgiveness And Important Facts You Must Know About It
Student loan forgiveness is a scheme or programme that prevents or stops you from repaying all or part of the debt you borrowed from the federal government.
This means that you — as a student who borrowed some amount of money from the government to sponsor your academics program — might see your debt being wiped off without paying all of them.
Different Between Loan Forgiveness And Loan Discharge
You need to know that there is a slight difference between loan Forgiveness and Loan Discharge. Loan forgiveness is easy to acquire from the government, and it’s given to someone who has being in a public service organization for a long period of time.
On the contrary, loan discharge is not easy to get as it happens once a blue moon. It is not given to everyone but to a set of borrowers who couldn’t repay their loan due to some reasons.
This group of people include individuals who are physically disabled, dead people, and people facing massive or intense financial crises.
How To Be Eligible For Student Loan Forgiveness
There are some criteria that guarantee your chances of enjoying this program. You must meet some requirements before you can see your loan debt being forgiven by the US government.
These requirements varies from one person to another, but one certain criterion is that you must be working in a public service organizations.
There are two ways in which you can be eligible for this program, they include: Being A Public Servant or working in one of the country’s public service; And By paying your outstanding debt through income-contingent plan over a lengthy period of time.
1. Being a Public Servant or Working in Public Service Organizations
This is one of the criteria that allow you to benefit from the student loan forgiveness scheme. As a public servant, you can take part in the Public Service Loan Forgiveness (PSLF) which is also a program by the US government to forgive or overlook citizens’ debt.
PSLF was established by the College Cost Reduction and Access Act of 2007 during Barack Obama’s reign as the US president was keen on reducing students debt. The program was solely created in order to motivate highly-intelligent graduates to pursue a career in the public sector of the country.
Apart from being a registered or a full-time public servant, you’re advised to enroll in a 10-year repayment plan to boost your chances of earning a loan forgiveness.
2. Repayment Plans With Loan Forgiveness
This is another way of boosting your chances of enjoying from the government-sponsored loan forgiveness program.
This method is a form of Income-driven repayment plans, that allows borrowers or graduates — who are financially handicapped and can not pay all of their debts within the set period of time (specifically 10 years) — to have an evaporated debt account.
However, this method isn’t available to borrowers or graduates working in any public or government-owned organization. For your loan to be forgiven via this method, you need to he involved on the following payment plans: Income-Based Repayment (IBR), Income-contigent Payment, Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE). You can click here to read more about the payment plans and how you can benefit from their loan forgiveness program.
Trump’s 2019 Budget Proposal
On the 12th of February 2018, President Trump unveiled his budget proposal for 2019. Below is a quick run down of the president’s budget for 2019:
— Trump made a budget of $686 billion for the country’s Navy ( both the Department of Defense’s (DOD) and the Overseas Contingency Operations (OCO)
— He also made a budget worth $19.9B for National Aeronautics and Space Administration (NASA).
— The US president made a budget worth $4,562,711,000 to cater for the National Oceanic and Atmospheric Administration (NOAA).
—He equally budgeted $7.472B for the National Science Foundation (NSF). Click here to read full breakdown of Donald Trump’s 2019 budget proposal
The president also desire to have an improved student loan schemes in 2019. This means that the income-driven repayment plan, Public Service Loan Forgiveness (PSLF) and Subsidized Student Loans are likely going to be affected by the president’s budget for the fiscal year.
Top Possible Effects Of Trump’s 2019 Budget Proposal On Students Loan Forgiveness
1. Income-Driven Repayment Plans Are Set To Suffer
As mentioned earlier, one of the ways through which you can enjoy Loan forgiveness is by engaging in income-driven repayment plans which gives you the chance to see your debt or loan being forgiven if you couldn’t clear all your debt within 10 years.
Unfortunately, Trump’s budget for fiscal year of 2019 might likely put an abrupt end to most of the repayment plans. This is because the budget consists of a new plan or strategy that will make repayment options more convenient for new borrowers.
It is believed that this budget will only provide borrowers with just one repayment option, while student loans would be forgiven after 15 years of payment.
2. The Public Service Loan Forgiveness Could Be Scrapped
The Public Service Loan Forgiveness (PSLF) is another way in which your student loan can be forgiven as soon as you make consecutive 120 on-time monthly payments.
Unfortunately, Trump’s budget proposal for 2019 is posing a huge threat to its continuity as the president is aiming to eliminate the program in order to generate huge revenue ($100 – $200 billion annually) from the total payment made by all debtors.
However, PSLF has a bright chance of surviving as it requires an act of congress to be eliminated. This because it was created by an act of congress in 2007.
3. Subsidized Student Loan Could Be Restructured
A subsidized loan is a kind of loan-without-interest a student is allowed to borrow while he or she is in college. A qualified student won’t start payment until he or she is out of college to pursue a career.
Trump’s budget proposal will mount an intense pressure on its existence as there will be a growing interest on every money borrowed by students while they are in school. This will equally make payment too difficult for students whenever they are ready to pay after finishing all their academic programs.
The Impact Of President Trump’s 2017 Tax Cuts And Jobs Act On Student Loan Borrowers
Here are the possible effects of Tax Cuts & Jobs Act on the Student Loan forgiveness.
1. Effects On The Public Service Loan Forgiveness (PSLF) Program
* It Gives Room For More Beneficiaries: Many predicted that the 2017 Act might negatively affect the importance of Public Service Loan Forgiveness (PSLF) program to students and other qualified American citizens, but the prediction was avoided by Trump’s shocking decision.
The President made an unexpected move by allocating $350million (included in the $1.3 trillion omnibus spending bill signed by Trump) to the PSLF program.
This move didn’t just put an end to all doubts surrounding PSLF future, but also ensured that there is massive financial capacity to boost the importance and relevance of the program. The Department of Education now have more than enough to give to qualified students who are financially unfit to sponsor their tuition fee and other school expenses.
* It Brings Massive Upgrade To The PSLF Program: As a result of the $350million allocated for the PSLF program, the US Department of Education was financially boosted, so much that it added some mind-blowing short-term programmes to the existing PSLF program.
One of these new programs include Temporary Expanded Public Services Loan Forgiveness (TEPSLF) which gives borrowers — who couldn’t benefit from PSLF — the opportunity to get their loan forgiveness this time.
2. It Leads To The Introduction Of The Total & Permanent Disability (TPD) Discharge
Another effect of the Trump’s policy on the PSFL is the introduction of Total and Payment Disability (TPD) Discharge program.
This program is the collaboration between the Department Of Education and U.S Department of Veterans Affairs to ensure that physically disabled veterans or borrowers have considerable chances of seeing their federal student loans — such as Direct Loans, Federal Family Education Loans (FFEL) and Federal Perkins — being forgiven.
This program also ensures that all qualified disabled veterans or individuals have access to the Federal students loans without too much stress or payment burden.