Trump Budget to Cut Student Loan Programs

The Trump administration's full budget proposal for the 2018 fiscal year, scheduled to be released next week, includes major changes to federal financial aid programs, according to details reported by The Washington Post. The newspaper obtained documents it said were described as a "near-final" version of the forthcoming budget by a U.S. Education Department employee.

The spending plan, an expansion of the "skinny" budget issued in March, calls for an overall $9.2 billion cut to the department, or 13.6 percent of the spending level Congress approved last month.

The proposal would eliminate more than $700 million in Perkins loans for disadvantaged students and nearly halve the Federal Work-Study program, cutting $490 million in funding. It would end loan forgiveness for public servants and move toward abolishing subsidized loans, for which the government pays interest while the borrower is in school.

The administration's plan would maintain funding for Pell Grants, support year-round Pell Grants, and increase available funds for year-round Pell by $16.3 billion over 10 years. The maximum annual award would remain flat at $5,920. Without any directive to index the award to inflation, that ceiling might remain in place for the foreseeable future, according to the Post.

The budget proposal would also replace five income-driven student loan repayment plans with a single plan. The move, which was one of President Trump's campaign pledges, would raise maximum payments to 12.5 percent of income over a shortened 15-year time period. The proposed change would benefit many undergraduate borrowers, who currently can have the balance of their loan forgiven after paying 10 percent of their income for 20 years. However, borrowers who take out loans to earn advanced degrees would pay more under the new plan, 12.5 percent of income for 30 years, compared to the current cap of 10 percent of income for 25 years.

The administration's budget is likely to meet resistance on Capitol Hill because of strong constituencies seeking to protect current funding, the Post reported. In response to a request for comment, a spokesman for Senate Education Committee Chairman Lamar Alexander (R-TN) referred to Alexander's response in March to the release of Trump's budget outline. That statement emphasized that while the president may suggest a budget, "under the Constitution, Congress passes appropriations bills."


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