Trump’s Proposed 2019 Budget and Your Student Loans

By Joseph Reinke, CFA, CEO of FitBUX

A few weeks ago I wrote an article about the new Student Loan PROSPER Act which had been introduced in Congress. I mentioned it was too early to tell what would actually be passed and we would provide updates as they are announced…

So, here is an update as promised: President Trump released his budget plan yesterday (February 11, 2018) and it includes his proposed changes to student loans.

It falls in line with what he said during his campaign and sometimes differs from the proposed PROSPER Act.

Which one will be put into law? My guess is some combination of the two.

The Details

Commonalities between the Prosper Act and the proposed budget:

  1. One item both proposals include is the termination of Public Service Loan Forgiveness so it's safe to assume that it will be gone.
  2. Similar to the PROSPER Act, the number of income-driven repayment plans would be reduced from 5 down to 1.

Differences between the Prosper Act and the proposed budget:

  1. Monthly IDR payments would be capped at 12.5% of your adjusted gross income. Currently, this varies between 10% and 20% depending on the plan.
  2. For graduate students, the repayment period would end either when your balance owed equals $0 or after 30 years. Currently, income-driven repayment plans are either 20 or 25 year-plans
  3. At the end of the 30th year, if you still owe money the balance would be forgiven but this would be treated as taxable income. This is the same as the current plans.

THE BIG News: Proposed Timeline

Here is the big date everyone has been waiting for….when does it take effect?

According to a number of sources, changes would apply to new borrowers borrowing AFTER July 1, 2019.

Also, it would not be applicable to borrowers already in one a graduate program, even after July 1, 2019.

Translation, if you are already enrolled prior to July 1, 2019, these changes will not affect you.

This is the current update….we’ll keep you posted as new news is rolled out.

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