Budget documents obtained by The Washington Post show President Trump’s administration is proposing a raft of changes that could have significant impact on college students and graduates.
By comparison, the current income-driven plan, known as Revised Pay as You Earn (REPAYE), forgives outstanding debt after 20 years of payment for people with bachelor’s degrees and 25 years for those with advanced degrees, but in both cases the monthly bill is capped at 10 percent of discretionary income. That means people with graduate degrees would expect larger monthly payments for a longer period of time, under Trump’s new plan.
“For grad students, this is a lousy deal,” said Ben Miller, senior director for postsecondary education at the left-leaning Center for American Progress. “Thirty years is like a mortgage. This would further encourage graduate student loan refinancing” to lower monthly payments.
Another change in the spending plan calls for the elimination of Public Service Loan Forgiveness, a program that wipes away federal student debt for people in the public sector after they have made 120 qualifying monthly payments, or 10 years’ worth of payments. The program, enacted in 2007 under President George W. Bush, was designed to encourage college graduates to pursue careers as social workers, teachers, public defenders or doctors in rural areas.
There are at least 552,931 people on track to receive the benefit, though the numbers could be much higher because some who are eligible may not have submitted income certifications. It’s unclear how the proposed elimination would affect any of those borrowers. As it stands, the Education Department is locked in litigation with borrowers who claim the agency inexplicably changed the eligibility requirement for employment that counts as public service after approving the work. In court documents, the department said there is no guarantee that forgiveness will be granted, a statement that has raised questions about the viability of the program.
“If you have income-based repayment, you don’t need Public Service Loan Forgiveness,” said Jason Delisle, a resident fellow at the American Enterprise Institute, a conservative think tank. “Income-based repayment allows people who work in jobs that might have lower pay make their monthly payments affordable. PSLF is duplicative, expensive and wasn’t well thought out.”
The spending plan would uphold a key provision in the recent congressional budget deal by providing continued support for Pell Grant recipients to use their award for as many as three semesters of college, instead of two. That way, students can take a full load of courses year-round, earn a degree faster and avoid taking on a lot of student debt. The Trump administration would increase available funds for year-round Pell by $16.3 billion over 10 years.
Still, the plan calls for pulling $3.9 billion out of the Pell program’s reserves. The maximum award would also remain flat at $5,920. And without any directive to continue indexing the award to inflation, that ceiling might remain in place for the foreseeable future.
While offering undergraduate students more Pell aid, the administration is proposing to cut federal work-study funds that help students work their way through college by $487 million. As promised in the “skinny budget,” the Federal Supplemental Educational Opportunity Grant would be eliminated, while TRIO and Gear Up programs, which help disadvantaged students in middle and high schools prepare for college, would sustain nearly $200 million in cuts.
“Cutting from critical education programs is penny wise and pound foolish,” said Zakiya Smith, who leads finance and federal policy strategies for Lumina Foundation, an education nonprofit. “Increasing access to and success in postsecondary education, especially for the most vulnerable members of society, remains a very important goal in the post-recession economy, and the budget should reflect this priority.”
The budget proposal would also deal a blow to college students with children by eliminating all funding for Child Care Access Means Parents in School, a program that subsidizes campus-based day care for low-income parents earning a degree. The rationale, according to budget documents, is that “subsidizing expenses associated with child care is not consistent with the department’s core mission.” Student parents, nevertheless, would get a bit of a reprieve as the administration would spare funding for existing child-care programs within the Department of Health and Human Services.
“We have to look at the big picture and overall these are very large proposed cuts to programs that help students afford college and repay their loans,” said Lauren Asher, president of the Institute for College Access and Success, an education nonprofit organization. “It looks like a dramatic step in the wrong direction for college affordability.”
Students could wind up paying more to borrow from the federal government as the Trump administration is calling for an end to subsidized loans, a form of debt in which the government pays the interest while the borrower is in school. Though the 2018 budget doesn’t entirely eliminate subsidized loans, it proposes an $8 billion reduction in available funding.
More money, however, is being made available for students loans that accrue interest, giving the impression that the Trump administration would like to phase out loan subsidies. The Congressional Budget Office recently estimated that ending subsidized lending would save $26.8 billion over 10 years.
“Evidence has shown that because the program is so heavily subsidizing student loans it has led to tuition inflation,” said Mary Clare Reim, a policy analyst in the Center for Education at the Heritage Foundation, a conservative think tank. “Drawing back these subsidies will give consumers a better idea of what the market value of their education is, so they can make more informed decisions.”
Under Trump’s spending plan, the government could eventually make more money off student loans through the elimination of Public Service Loan Forgiveness, changing income-driven repayment plan for graduate students and doing away with subsidized lending. There are no estimates in the budget detailing that potential savings, but it could be a significant windfall.
“We’ve been able to keep the doors to college open regardless of income. … It would be a disgrace if we turn the clock back,” said Rep. Robert C. “Bobby” Scott (Va.), the ranking Democrat on the House Education and the Workforce Committee. “Cutting taxes that are heavily weighted to the wealthy at the same time that you’re cutting educational opportunity for those most in need is a matter of priorities.”