What impact might a Trump Presidency have on student loan debt?
During his campaign, President-elect Donald Trump has said little about higher education or the nation’s $1.3 trillion of student debt, which has led to a lot of speculation as to what student borrowers can expect moving forward.
What We Know
Trump has made a few statements about students that warrant discussion, including:
- Modification of Income-Based Repayment – reducing payments to 12.5% of discretionary income, down from 15%, and remaining balance forgiveness after 15 years.
- Overhauling the Federal Student Loan System – including removing government from lending and reinstating private student lending as the primary means for obtaining student loans.
- College-Student Risk Sharing Arrangements – making colleges accountable to students who are unable to repay their student debts and perhaps requiring colleges to repay a portion of any defaulted amount.
- Deregulation of both non–profit and for-profit educational institutions – this rollback of President Obama’s gainful employment regulations might affect minimum thresholds for graduates’ debt to income ratios.
There has also been some talk generally amongst the Republican Party about abolishing the Consumer Financial Protection Bureau, which has been working to improve federal and private student loan servicing.
What This Means for Student Loan Borrowers
For those student loan borrowers with existing loans, effects may be minimal. The most direct impact could be from Trump’s proposed IBR modification. If passed, student loan borrowers may have lower monthly payment requirements and loan forgiveness after 15 years, as opposed to the 25 year forgiveness option currently in effect. There has been no talk of changing the treatment of student loan debt in personal bankruptcy.
For those students who have yet to borrow for their higher education expenses, Trump’s impact could be substantial. Aside from seeking to reverse certain consumer protections with the abolishment of the Consumer Financial Protection Bureau, new student loan borrowers may be faced with additional hurdles to obtaining student loans. Trump’s proposal to privatize most student loans will impact the ability of student borrowers with little to no credit to obtain loans for higher education. Additionally, private student loan borrowers will likely be faced with higher interest rates than their government loan counterparts and more restrictive repayment terms.
Again, Trump has made no mention of changing the law regarding student loans and bankruptcy. However, if he is successful in privatizing student loans, and because some private student loans can be discharged in bankruptcy, this might be a positive step for students who become unable to handle their private student loan debt.
Unable to Manage Your Student Loan Debt?
If you are struggling to meet your basic personal needs for your family due to excessive student loan debt, there are ways to make things easier on yourself. The experienced bankruptcy attorneys at Hanson & Payne can review your situation and provide you with options for alleviating your financial situation. Contact us today or call (414) 271-4550 for a consultation.