Numerous student loan borrowers are questioning how Donald Trump’s methods for dealing with the student loan crisis will change them going forward. In addition, borrowers are also questioning how his decision for Secretary of Education, Betsy DeVos, will require to manage federal student loans in the prospect. While being an outspoken advocate in many areas of study, she has yet to speak the demanding issue of student loans.
Both of these are critical questions that may eventually be taking early answers. Sadly, those statements are scary for a huge number of student loan borrowers. Statements as of May 2017 are that Trump and DeVos’ initial education budget will seek to pass the Public Service Loan Forgiveness program which could require student loan borrowers billions of dollars. Trump and DeVos will be expected seek to eliminate over $700 million in Perkins Loans and massively decrease the amount of work-study programs.
How Trumps New Tax Cuts and Jobs Act Makes a Difference Students & Borrowers
On 12/22/2017, the Tax Cuts & Jobs Act was enacted into law. In the 429 page document, there are changes made to existing laws that would significantly change current students, those with student loans, along with parents who have dependents on their taxes currently in school.
Student Loan Discharges No Longer Taxable Income
Section 11031 of the Tax Cuts & Jobs Act fixed student loan discharges by total & permanent disability(TPD) from being added to the borrower’s gross income. Under the new rule, discharge student loans are no longer seen as taxable income if using for disability discharge. This is a hugely advantageous change for disabled borrowers who want to utilize for discharge on their federal student loans. Before many borrowers elected not to apply for discharge and remained in an income-based repayment plan.
Disabled borrowers were hesitant to have their student loans discharged since they would see a massive tax bill expected at the end of the year, which was in many cases uncontrollable. This move made by the Trump administration comes as a tremendous support to disabled federal student loan borrowers.
One big move done in the Tax Cuts & Jobs Act is that case deductions for student loans are exterminating starting in 2018. If you are making under $65,000/yr as a single, or $130,000/yr if you are married and filing combined, you are qualified for an interest deduction on your student loans of up to $2,500. IRS records reveal that in 2015 there were 13.4m people who insisted that deduction and the common deduction was $1,100. That would change to a decreased tax liability of $275, for someone in the 25% tax bracket. It’s not a large amount, but for a struggling person out of college working to make ends meet.
*This was cut from the final version of the law
Graduate Tuition Waivers Will Be Taxed
Graduate students usually get jobs at their university in exchange for a tuition waiver. These grads are usually managing on research, teaching in a classroom, and working to earn their graduate degree at the same time. The school will waive a part of their tuition, usually into the many thousands of dollars for their effort. The IRS does not view that tuition waiver as taxable income. For a graduate who makes a $25,000 tuition waiver and is in the 12% tax bracket, this would end in a tax bill of $3,000 dollars, while they may not even have an actual income. These are students working full time to get that waiver but may not have any actual income.
*This was cut from the final version of the law
Private Student Loan Consolidation
Private student loan consolidation is available through various banks we work with to combine all your student loans into one new loan. Private student loan consolidation requires a good credit score and will often have better rates than the federal student loan.
American Opportunity Tax Credit Improved
The American Opportunity Tax Credit has been renewed by the Tax Cuts & Job Act. This is one of the major big deductions for student loans that allows up to a $2,500 deduction for fitted education costs for the first 4 years of higher education. The IRS reports show that 9m Americans used for this tax credit last year. The Tax Cuts & Jobs Act has raised the allowable deduction time to five years rather than four, except the fifth year is at a decreased $1,250 deduction. The deduction is measured as being 100% of the costs incurred up to the first $2,000, and then it’s 25% of the next $2,000 for a maximum of $2,500.
Lifetime Learning Credit Being Axed
This turns into a deduction of up to $2,000, which could be done for many years as you had education expenses. The big separation between the American Opportunity Tax Credit & the Lifetime Learning Credit is the latter allows for deductions based on vocational costs. By eliminating this tax credit it is harming those who want to develop their skill and gain valuable hands-on training in a field that may not be available at a traditional university
What should borrowers do, if Trump & DeVos would take Public Service Loan Forgiveness away?
For borrowers who are suited for PSLF, instantly guarantee that your loans are in the Direct Loan Program (consolidate your loans as important)
If you are in the Direct program (and suitable for PSLF) verify your employment status instantly.
These moves alone will not ensure that borrowers will get PSLF, but being in the program prior to any law reforms is expected to develop your chances of getting it considerably.
Trump Signs Budget Including $350m For Loan Forgiveness
In the spending bill passed by Congress in March 2018 to fund the government throughout September, Congress neglected many of the Trump administration’s budget offers including doing away with the Public Service Loan Forgiveness Program. Rather, Congress allotted $350 million for the Department of Education to assist borrowers with earlier unqualified repayment plans to get student loan forgiveness, and President Trump signed it into law. The idea of the PSLF was to entice graduates to use qualified public service jobs that helped the community and to allow forgiveness of every student loan debt for the borrowers after 120 payments over 10 years into an income-driven repayment plan. To usually be available for forgiveness under PSLF, you have to be on an income-driven repayment program. The $350 million is earmarked for the borrowers who meet whole requirements but were paying in a graduated or extended repayment plan, which is not usually available. But, $350 million is unlikely to include all who apply. The new program is named as the Expanded Temporary Public Service Loan Forgiveness program.
Based on what Trump has said so far, here are his other most visible views:
Trump requires to consolidate all current repayment plans into a single Income-Based Repayment program (IBR). This would occur in students paying 12.5% of their income to their loans every month and get complete loan forgiveness after 15 years.
He has made orders to cover increased forgiveness amounts (and the higher cost to taxpayers) because of shorter repayment terms by reducing federal spending accordingly.
Trump assures to scale back funding significantly for the Department of Education.
Here are the other moves the Trump administration has made:
- The government “shouldn’t be earning money on student loans”—the only fix to this would be to reduce the interest rate for federal loans moving forward
- Drop the Public Service Loan Forgiveness program (in favor of placing all borrowers in a single IBR)
- Push colleges to cut tuition by decreasing high administrative costs
- Reduce federal regulations on colleges to decrease their compliance expenses so they can pass those additions along to students
- Universities will be assumed to contribute all of their endowment money going forward on their students (rather than “hedge fund managers”) to hold tuition low and cut student debt or risk losing their federal tax breaks
- Potential tax-exempt status for big university endowments if schools don’t start making their degrees extra affordable for students
If he does adjust the IDR program as he has recommended, those interested in Income-Driven Repayment plans would have a bigger monthly payment, Though forgiveness would happen sooner.
Here are the important questions:
Here are the important notable questions:
- No specifying of tax implications on forgiven student loan amounts
- No specifying of bankruptcy reforms
So how will this change your student loans going forward? What should you do concerning it?
Recommendations for Borrowers:
1) Trump is obviously in support of a single IBR program going forward, which will have a less forgiveness period than the version currently in place. If you’re not, it may be useful to wait and see what happens with Trump’s stated new variant before you enroll. The shorter forgiveness time may end up protecting your money on the long-term.
2) Be sure to stay current on your student loans payments and out of default status. This is necessary because, in history, new student loan programs have been more hard for those in default to enrolling in. Holding your loans in good standing is an excellent method to keep your opinions open going forward.
3) At this point, there is no true knowledge accessible regarding how Trump’s student loan policies will change private loans, if at all. It may be best to just to wait and see what develops. This may give a chance to take benefit of better choices in the near future.
Clearly, there are still questions in the minds of student loan borrowers regarding how Trump’s future policies will change them. Rest assured that as things develop, Student Loan Resolve intends to give student borrowers with the most up-to-date data and guidance.
Will Trump forgive my student loans?
While nothing is set, it looks like whatever program Trump implements will have an end of term Trump Student Loan forgiveness as a component. His most recent thinking is that forgiveness has to be after 15 years of payments.
Want to learn more about Trump Student Loan Forgiveness?
Just fill the form or click “Call Now” button.
How can I sign up for student loan forgiveness?
Be sure your Trump Student Loan is enrolled in the right loan program. If not, combine them within the direct loan program. If they are Stafford loans you can view if you qualify for any of the Stafford forgiveness programs. Here is a full example to student loan forgiveness.
Will Trump lower my student loan payment?
You probably don’t need to wait for Trump to reduce your payment, you may be able to decrease your payment today. See Income-Driven Repayment programs or private loan consolidations today. Based on his reports so far probably he will stay with the Income-Driven Repayment program that supports borrowers reduce their payment to a flexible amount.
Will Trump lower my student loan interest rate?
Till now he didn’t make any definitive comments about interest rates, though he has said the Department of Education shouldn’t benefit from Trump Student Loan. One idea to make sure they aren’t profiting would be to reduce the interest degree.
Will Trump discard the Public Service Loan Forgiveness?
He has not said this directly. But, he said that he requires to roll every current federal student loan programs within a single Income-Based Repayment program. One can only think that this would involve the Public Service Loan Forgiveness program too, but this is by no means guaranteed.
Trump’s cancellation of student loan protections can grow the federal government’s involvement.
The Department of Education has excluded Obama era protections to student loan borrowers that want to rehabilitate their loans.
By making rehabilitation of privately operated loans less attractive, borrowers are supposed to opt to skip rehabilitation and quickly combine their FFEL loans within the Federal Direct Loan Program to make use of income-based repayment programs. When borrowers do this action, it carries credits from private balance sheets to the federal government.