Let’s mention a number of the items that have changed under the Trump administration. These are changes that have already gone into effect – they’re the law. However, remember these laws can always be changed within the future.
Tax Free Death And Disability Student Loan Discharge
We’ve discussed before in our article on secret ways to urge student loan forgiveness that, unless you’re during a qualifying program, most student loan forgiveness and student loan discharges are considered taxable income.
That means if were to urge $50,000 in student loans forgiven, it’s considered income. If you made $35,000 working, your total income for the year would now be $85,000. The result? a better bill . Borrowers could see their tax bills rise by $10,000 or more!
To make matters worse, if you’re getting your loans discharged thanks to total and permanent disability, this “income” could disqualify you from aid programs that you simply might believe .
However, Trump tax plan, referred to as the Tax Cuts and Jobs Act, eliminated the taxability of student loan discharge on people that catch on for Death or Total and Permanent Disability. meaning , if you’re getting student loans discharged on death or disability, you not will face a tax burden (or your family won’t).
It’s important to notice that this provision only went into effect on January 1, 2018 – then any loans discharged in 2017 will still face taxes. Furthermore, this provision is about to expire in 2025 unless Congress renews it.
Trump Signs Budget Including $350m For Loan Forgiveness
In the spending bill passed by Congress in March 2018 to fund the government throughout September, Congress neglected many of the Trump administration’s budget offers including doing away with the Public Service Loan Forgiveness Program. Rather, Congress allotted $350 million for the Department of Education to assist borrowers with earlier unqualified repayment plans to get student loan forgiveness, and President Trump signed it into law. The idea of the PSLF was to entice graduates to use qualified public service jobs that helped the community and to allow forgiveness of every student loan debt for the borrowers after 120 payments over 10 years into an income-driven repayment plan. To usually be available for forgiveness under PSLF, you have to be on an income-driven repayment program. The $350 million is earmarked for the borrowers who meet whole requirements but were paying in a graduated or extended repayment plan, which is not usually available. But, $350 million is unlikely to include all who apply. The new program is named as the Expanded Temporary Public Service Loan Forgiveness program.
Based on what Trump has said so far, here are his other most visible views:
Trump requires to consolidate all current repayment plans into a single Income-Based Repayment program (IBR). This would occur in students paying 12.5% of their income to their loans every month and get complete loan forgiveness after 15 years.
He has made orders to cover increased forgiveness amounts (and the higher cost to taxpayers) because of shorter repayment terms by reducing federal spending accordingly.
Trump assures to scale back funding significantly for the Department of Education.
Here are the other moves the Trump administration has made:
The government “shouldn’t be earning money on student loans”—the only fix to this would be to reduce the interest rate for federal loans moving forward
Drop the Public Service Loan Forgiveness program (in favor of placing all borrowers in a single IBR)
Push colleges to cut tuition by decreasing high administrative costs
Reduce federal regulations on colleges to decrease their compliance expenses so they can pass those additions along to students
Universities will be assumed to contribute all of their endowment money going forward on their students (rather than “hedge fund managers”) to hold tuition low and cut student debt or risk losing their federal tax breaks
Potential tax-exempt status for big university endowments if schools don’t start making their degrees extra affordable for students
If he does adjust the IDR program as he has recommended, those interested in Income-Driven Repayment plans would have a bigger monthly payment, Though forgiveness would happen sooner.