What will a Donald Trump presidency mean for student loans? We have a $1.3 trillion student loan debt. And 40 million students continue to borrow more than $158 billion per year and incur a lifetime of debt. What will the Trump administration change?
Newly corrected data from the Education Department show the majority of student borrowers from more than 1,000 institutions repaid nothing in the three years after finishing school. A January (2017) report from the Consumer Financial Protection Bureau shows that the number of student debtors older than 60 has quadrupled in a decade. The cost of attending universities continues to outpace inflation and the growth of family incomes, and continues at an ever-increasing rate.
It’s hard to know where student loan policy is heading with the new administration. New student repayment plans and private loan options have been mentioned, but it remains a convoluted and flawed financial model that favors universities.
During the presidential campaign, Trump offered a proposal: When students graduate (or depart), they can opt into an income-driven repayment plan where federal loan payments are capped at a percentage (12.5 percent) of one’s income for 15 years. After that time has elapsed, all debt is forgiven. To quote (then candidate) Trump, after 15 years, “we’ll let them get on with their lives.” These plans would likely equate to repayment of only one-half of the $1.3 trillion.
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Trump also proposed that universities enter “risk sharing” with student debt, that colleges should have some financial responsibility if a portion of their students defaulted on their loans. Trump supports the idea that university endowments (currently valued at $500 billion) should help support their students. Likely, Trump plans to encourage Congress to remove university federal tax breaks.
Trump’s college “affordability” proposal considers the elimination of federally funded student loans. It’s politically very difficult, of course, but made in reaction to the fact that the more federal/student/financial aid available, the higher the tuition (and fees) charged by universities, and the greater the amount of student debt. Universities raise the cost of attendance when more financial aid is made available. And the only certain way to lower student debt is to cut the cost of college tuition.
A new task force, headed by Jerry Falwell Jr., of Liberty University, has been charged with deregulating higher education. The new “financial model” is intended to reduce increases in tuition and fees, provide less (no) federally funded financial aid for students, and encourage universities to spend more of their endowment incomes for student assistance.
The consequences of less (no) federal financial aid for students, reducing university endowments and likely putting more emphasis on graduation rates, will change the existing structure of universities and savings strategies for millions of people.
Carl Evensen is a resident of Ferguson Township. Now retired, he formerly was an executive for the Pennsylvania State System of Higher Education and George Washington University.