Last week the Washington Post released early details of the White House’s leaked proposed education budget, which outlined cuts to federal education spending — including getting rid of the Public Service Loan Forgiveness program that promises to relieve the debt of student-loan borrowers who take government and nonprofit jobs.
Today, the Trump administration officially unveiled its 2018 budget, which included more detail on how student loan and federal financial aid could be affected. Among the proposed changes:
- Replacing the numerous options for student loan repayment with just one option: Capping monthly payments at 12.5% of discretionary income, and forgiving balances after 15 years for undergraduate loans.
- Eliminating the Public Service Loan Forgiveness Program, although there are no details on how quickly it would be phased out.
- Ceasing federally subsidized student loans, in which the government pays interest for student loans while students are still in school
- Providing Pell Grants year round, rather than just in the fall and spring.
The budget moves are aimed at slashing federal education spending in an effort to allocate more money toward expanding charter schools, voucher programs, and state programs for school choice.
Among the other changes in President Trump's budget proposal, which aims to cut about $3.6 trillion in spending over the next decade: Cutting funding to Medicaid and other public-assistance programs; cuts to environmental programs; and reductions in funding medical research and disease prevention. Military funding and infrastructure spending, meanwhile, would see a boost.
To be sure, the president's budget would need to be approved by Congress in order to take effect, and many pundits believe the budget won't be passed as is. That's partially because both sides of the aisle appear to view the president's cuts as dramatic; in addition, Congress typically drafts its own version of the budget using the previous year's budget — rather than the president's — as a starting point.
Still, for student loan borrowers in particular, it doesn't hurt to start thinking about how you may have to adjust your budget and student-loan payoff goals if changes do happen, so that you're prepared — rather than caught off guard — by any future changes. Here is a 101 on student loan refinancing, and here's one thing to try if you want to pay off your loans faster.