Recently President Donald Trump made a speech about the changes in the Student Debt Forgiveness program. His opinion could surprise most of you. Donald Trump blamed the federal government for the profitability of this program. He claims that that is one of the programs of government which should not make money. He also emphasizes that to take student loan as a profit center is just terrible. It is enough to remind that in 2013 loan programs turned profit about $41.3 billion and at the same that most of the borrowers struggle to make their financial ends meet. As a result, President Trump wants to make some changes in the current student debt forgiveness program. So let’s see what kind of changes going to do Trump Administration about student loan forgiveness program.
Are the changes beneficial for borrowers?
The only thing we can say, the best side of this news is the proposal of President has not passed yet. Most of the people think that this proposal could be a disaster for borrowers. Unfortunately, they are right in this case, as the speech of Trump not so optimistic about student loan borrowers. If the plan comes true, then it will be a disadvantage for students who want to benefit from the advantage of the Public Service Loan Forgiveness Program. As this program are known the best plan in existence for eliminating Federal student loans.
Another good news is that the new changes won’t affect the student who benefits from student debt forgiveness program before July 1st, 2019. It means that if you want to escape these changes, then you should hurry up and benefit from the student loan programs before the shown date. It is another way to be away from disadvantage updates of new rules.
What is the changes and proposals of Trump administration about student loan program?
About the changes, we can say that there are 2 main changes. One of them is about tax-free death and disability student loan discharge and the second one is related to tuition and fees deduction elimination.
What promises tax- free death and disability student loan discharge to borrowers?
If you want to get more info about tax- free death and disability student loan discharge changes we can report that these changes make procedure worse, then it is. What is it mean? It means that if you benefit from loan discharged due to either total or permanent disability. This “advantage” could disqualify you from the aid program which you rely on the future. It means that the student loans forgiveness program proposed by Trump promise a higher tax bill and there is no doubt that the borrowers could see their tax bills rise by $10,000 or more!
What does the tuition And Fees Deduction Elimination mean?
This change has been eliminated under the Tax Cuts and Jobs Act. The tuition and fees deduction allowed people to reduce their taxable income by up to $4,000. Additionally, we want to remind the borrowers about proposals to eliminate or change other education tax credits. For example, the American Opportunity Tax Credit and the Lifetime Learning Tax Credit stay the same as they were. At the same time, there are income limits to these education tax credits, and the tuition and fees deduction help some relief to the borrowers who are high earner taxpayers.
If you any doubts about the start of the process, we recommend the student loan planner which helps you organize your financial plan for student loan debt.
Is it the end of Public Service Loan Forgiveness Program?
Public Service Loan Forgiveness Program, is the best forgiveness programs. Most of the student was benefit from the advantage of this forgiveness program. But unfortunately, the recent proposal of President Donald Trump about 2019 Budget could be the end of this program!
As you know the Public Service Loan Forgiveness Program is eligible for people, especially for students who agree to work full-time in a public service position. For instance, a public service employee you can work in any position in government organizations, Non-profit Organizations and other fields which considers as “public service”. Moreover, it helps borrowers to make payments toward loans for 10 years (120 monthly payments).
President Trump’s Administration claims that the Forgiveness Policy could save taxpayers $203 Billion over the next decade. On the contrary, Congressional Budget Office disagrees with this prognosis, and they suppose that this number would be close $100 Billion in savings over the same period.
It is undeniable that this number quite good for the budget. But we should agree that if Congress goes along with this Trump Administration offer, without amending it. This would be terrible for people who think benefit from the best forgiveness program in the future.
Make changes in the repayment system
To make changes in repayment plans is another propose of President Trump about forgiveness programs.
He has proposed to eliminate all the income-driven repayment plans, such as IBR, PAYE, RePAYE, ICR and replace them with a single one. Due to new forgiveness policy, the borrowers should pay 12.5% from their discretionary income. At the same time, the new system would also provide for student debt forgiveness at 15 years for undergraduate students, and 30 years for graduate borrowers.
Another exciting moment in the comment of President was about tax-free student loan forgiveness. He has made comments that he would like the government to cover the cost of student loan forgiveness under his new plan. As it leads us to believe that it would be tax-free student debt forgiveness. But of course, the future of the repayment system will show its cons and pros.
New student debt forgiveness policy would allow Student Loans To Be Discharged In Bankruptcy
About being discharged in bankruptcy, we can say that it was accepted before 1998. According to this law student loans could be discharged in bankruptcy after the seventh year of repayment. But after that year student loans were prohibited from being discharged in bankruptcy except in cases of “undue hardship.” Another hard issue was related to the “undue hardship” situation. As Congress never defined what undue hardship meant and in this case, a court should have evaluated the real situation. It is quite hard to prove your real “undue hardship” situation, and it means that as a borrower you have to prove that you’d never be able to afford your loans. It not so easy as it sounds. That is why a majority of the people write off the ability to get student loans discharged in bankruptcy.
The proposed changes about discharged in bankruptcy could make the program more difficult and more expensive for borrowers to get a loan.
What kind of changes offer Elimination the Student Loan Interest Deduction
This student debt forgiveness propose could seem right, while this deduction will be saved in the final bill. It does not mean that a new proposed rule will allow it eliminated. The amount of student loan interest deduction provides up to $2,500 in the discount of the interest. The Elimination, the Student Loan Interest Deduction, could be nest egg and it does phase out at relatively low-income levels.
What is the future of student loan forgiveness?
In his speech, Trump has paid attention to the difficulty of the Forgiveness Policy. He said the current system is quite complicated and needs some changes. Maybe some changes and propose made by Trump Administration seems intricate. But the new Student Debt Forgiveness Policy also could change in a positive way for most of the borrowers who struggle with excessive student loans.