If there are a couple more rate increases over the next several years, a student who graduates with $31,100 in loans at a blended rate of 5.1 percent would pay $49,672 to repay them over 20 years - $5,380 more than the $44,292 in total repayment costs they would be looking at if they'd been able to take all of their loans out at 3.76 percent, said Stephen Dash, chief executive of Credible, a marketplace for student loans. It would also cut the Federal Work-Study program by $490 million - nearly half - and eliminate the Public Service Loan Forgiveness Program entirely. Many teachers, public defenders, Peace Corps workers, and law enforcement officers fit the qualifications. The first "wave" of people who would qualify for loan forgiveness will hit their 10-year mark in October.
Documents from a preliminary Education Department budget obtained by The Washington Post reveal President Donald Trump plans to put the Student Loan Forgiveness Program on the chopping block.
"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". 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. Congress would have to approve the department's proposed changes for them to take effect. At this point it's unclear if the Trump Administration could affect the program for those who are already enrolled or if it would only shut down the program moving forward.
A request for comment from the Education Department was not immediately returned. "The federal government must do more to make sure students in OR and across the country have access to payment flexibility and debt relief, instead of creating more roadblocks to an affordable college education". He's moved states to get a better job that still qualifies him for the debt relief.
Trump's proposed student loan repayment scheme is income-based where students have to pay their loans a little higher but will have a shorter time toward loan forgiveness.
The budget proposal would also include a new income-driven repayment program as promised by the Trump presidential campaign, raising maximum payments to 12.5 percent of income over a shortened 15-year time period. All that's needed to enroll is some paperwork that enables contracted loan servicers to confirm borrowers' annual earnings, but experts inside and outside the government say they don't know why this step isn't completed, and distressed borrowers are left stuck in debt collectors' sights.
"It's one of the more convoluted programs that Congress has designed", said Rohit Chopra, the former student loan ombudsman at the Consumer Financial Protection Bureau.
The White House also reportedly wants to make some major changes to the Department of Education's income-based repayment options, which cap monthly payments as a percentage of a borrower's income. Signing up for that repayment plan alone requires submitting information about your income each year - a process which can take weeks and temporarily stop the clock on your 10 years of payments. The Obama Administration had proposed capping the amount borrowers could have forgiven at $57,500, but that proposal was never approved and forgiveness remains unlimited. Even more troubling is the fact that over 40 percent of borrowers that go through reconciliation default again within three years, the Consumer Financial Protection Bureau reports.
Even if Crooks can remain in the program, he worries that future grads will be discouraged from entering public service jobs if it's no longer available for them.
"With student debt hanging over them, it might not be be financially possible for recent grads to commit to public service careers", he said.