On February 12, the White House released its budget proposal for Fiscal Year 2018, a document that calls for numerous changes to the repayment and forgiveness of federal student loans taken out after July 1, 2019. While Congress, of course, retains responsibility for any appropriations legislation, this document’s wish-list reflects the apparent priorities of the Trump Administration: the complete overhaul of the federal student loan program and cuts of $3.8 billion to the budget for the Department of Education.

Some prominent changes include:

  • Public Service Loan Forgiveness Program (“PSLFP”): The budget eliminates this program. As it is presently constituted, borrowers who are eligible for PSLFP can apply to receive loan forgiveness for working in certain types of public service jobs, after making 120 months of consecutive payments. Nearly two-thirds of student loan borrowers interested in PSLFP earn less than $50,000 a year.
  • Income-Drive Repayment (“IDR”) Plans: The federal government’s four income-driven repayment plans would be consolidated into one universal income-driven plan that caps payments at 12.5% of a borrower’s annual discretionary income. Under the new rules, undergraduate borrowers could win forgiveness after fifteen years of payments, while graduate students would need to make thirty years of consecutive payments before gaining such an opportunity. Presently, the DOE’s regulations allow borrowers to receive forgiveness after twenty years of payments for undergraduate school loans and twenty-five years for graduate school loans. In support of this change, the budget plan says: “[T]he numerous IDR plans currently offered to borrowers overly complicate choosing and enrolling in the right plan.”
  • Subsidized Student Loans: As with the PSLFP, the budget abolishes all subsidized federal student loans. These loans, which do not accumulate interest during a borrower’s schooling, were used by approximately 5.7 million students in the 2016-17 school year.
  • Pell Grant Program: If this budget is enacted, Pell Grants would be expanded to cover short-term, training programs. Currently, Pell Grants cannot be used for academic programs shorter than fifteen weeks or that include fewer than 600 hours of instruction.
  • Consequences of Delinquency: The budget would subject delinquent borrowers to far more stringent enforcement and calls for “streamlin[ing] the Department of Education’s ability to verify applicants’ income data held by the Internal Revenue Service.”
  • Elimination of Various Programs: Some 30 programs would also lose funding, including the Supporting Effective Instruction State Grants, 21st Century Community Learning Centers, and Federal Supplemental Educational Opportunity Grant programs.

In support of these proposals, the Trump Administration stressed their potential to save $143 billion over the next decade. Secretary of Education Betsy DeVos stated that the budget “expands education freedom for America’s families while protecting our nation’s most vulnerable students” and “reflects our commitment to spending taxpayer dollars wisely and efficiently by consolidating and eliminating duplicative and ineffective federal programs that are better handled at the state or local level.” Notably, some of these suggestions appear in draft legislation already being considered by federal lawmakers.