The presidential election is days away, and it’s important that you simply understand what Trump’s potential re-election could mean for your student loans. Let’s separate the facts from fiction. There are many proposals in Congress to cancel student loan debt.
Trump doesn’t support these plans to cancel student loan debt for all student loan borrowers.
Similarly, U.S. Secretary of Education Betsy DeVos doesn’t support widespread student loan debt cancellation.
Could Trump cancel student loan debt? It’s unlikely during a potential second term. However, there’s always the potential for a about-face .
While Trump doesn’t support immediate, widespread student loan debt cancellation, Trump supports student loan forgiveness through income-driven repayment plans.
Trump proposed simplifying multiple income-driven repayment plans to one plan that might reduce bureaucracy, complexity and confusion.
Trump proposed to cap the quantity of federal PLUS Loans, which folks can borrow for his or her dependent children and borrowers can borrow for grad school .
Trump would limit the quantity of PLUS Loans to $50,000 per annum and $100,000 total.
Trump would limit the quantity of Parent PLUS Loans to $26,500.
The rationale to limit the quantity of student loans is to limit the quantity of student loan debt that a borrower can assume.
Trump proposed to eliminate the general public Service Loan Forgiveness program.
Trump believes that student loan forgiveness should be available under income-driven repayment plans.
Trump Student Loan Forgiveness
Numerous student loan borrowers are questioning how Donald Trump’s methods for dealing with the student loan crisis will change them going forward. In addition, borrowers are also questioning how his decision for Secretary of Education, Betsy DeVos, will require to manage federal student loans in the prospect. While being an outspoken advocate in many areas of study, she has yet to speak the demanding issue of student loans.
Both of these are critical questions that may eventually be taking early answers. Sadly, those statements are scary for a huge number of student loan borrowers. Statements as of May 2017 are that Trump and DeVos’ initial education budget will seek to pass the Public Service Loan Forgiveness program which could require student loan borrowers billions of dollars. Trump and DeVos will be expected seek to eliminate over $700 million in Perkins Loans and massively decrease the amount of work-study programs.
How Trumps New Tax Cuts and Jobs Act Makes a Difference Students & Borrowers
On 12/22/2017, the Tax Cuts & Jobs Act was enacted into law. In the 429 page document, there are changes made to existing laws that would significantly change current students, those with student loans, along with parents who have dependents on their taxes currently in school.
Student Loan Discharges No Longer Taxable Income
Section 11031 of the Tax Cuts & Jobs Act fixed student loan discharges by total & permanent disability(TPD) from being added to the borrower’s gross income. Under the new rule, discharge student loans are no longer seen as taxable income if using for disability discharge. This is a hugely advantageous change for disabled borrowers who want to utilize for discharge on their federal student loans. Before many borrowers elected not to apply for discharge and remained in an income-based repayment plan.
Disabled borrowers were hesitant to have their student loans discharged since they would see a massive tax bill expected at the end of the year, which was in many cases uncontrollable. This move made by the Trump administration comes as a tremendous support to disabled federal student loan borrowers.
One big move done in the Tax Cuts & Jobs Act is that case deductions for student loans are exterminating starting in 2018. If you are making under $65,000/yr as a single, or $130,000/yr if you are married and filing combined, you are qualified for an interest deduction on your student loans of up to $2,500. IRS records reveal that in 2015 there were 13.4m people who insisted that deduction and the common deduction was $1,100. That would change to a decreased tax liability of $275, for someone in the 25% tax bracket. It’s not a large amount, but for a struggling person out of college working to make ends meet.