How a Trump Presidency Might Affect Your Student Loans

Student loans are quickly approaching the point where they will be equal to the amount of credit card and auto loan debt. A whopping $1.5 trillion dollars in debt is accumulating thousands of dollars in interest every second. While there have been changes in the way student loan repayment has been handled over the past eight years, student debtors are looking at some big changes as the Trump administration fills cabinet positions and creates policies. There hasn’t been a lot of detail about Trump’s plan, but it is somewhat similar to the current plan.

1. Borrowers will pay 12.5 percent of their income instead of ten percent – this means higher payments and leaner budgets.
2. The tradeoff is that instead of 20 to 25 years before loan forgiveness kicks in, the term would be 15 years instead. It’s open to question of the current forgiveness period for public sector workers would be left in place.

Aside from that there’s not a lot of details, aside from possibly getting the federal government out of the student loan business and allowing private banks to take over. Future students may have to pick a major that has better chances for employment after graduation, pushing liberal arts to the side in favor of “salable” majors such as engineering, health care, and accounting.

Deregulation may also be in the wind, rolling back some of the hard fought changes sought by the Obama administration. This would mean getting rid of the gainful employment rule, the recently revamped borrower defense to repayment rule, and possibly even be the death knell for the Consumer Financial protection Bureau. Schools may also be forced to put some skin in the game by taking responsibility for post-graduation employment outcomes,

Much to the dismay of colleges, their endowments – multimillion or multibillion dollar tax-free pools of money from alumni and donors – might be on the federal radar if they do not use those endowments to bring down the costs to students. Endowments are typically used for facilities, enriched academic programs, sports programs and facilities, top-caliber professors, research, and grants or aid to students. How this would go over with donors remains to be seen. Another possibility is that FAFSA – federal student aid – could be used at non-accredited schools. Currently only students in DOE accredited postsecondary schools qualify for financial aid.

If you are thinking of college, you need to think carefully on what the next four years will bring. While your heart may be in the arts, you may be forced to take a marketable major instead of following your dreams. In addition to clearing the hurdles of the admissions process, you may be asked to convince a banker that your studies are going to give you a degree that will land you a job with enough income to pay off your loan. For those with outstanding loans, you might want to look at your options for consolidation, or rework your payment arrangements to be less burdensome. Call us for a free consultation in either office – we’re open seven days a week and can help you get a grip on your balances!