Student loan forgiveness may have an uncertain future
Student loan forgiveness may have an uncertain future
The cost of paying back a student loan will soon be more expensive for new borrowers
19 May, 2017, 14:36
Overall the Department of Education budget would be slashed by $10.6 billion, according to the Washington Post, which obtained a copy.
Following the annual Treasury Department 10-year note auction that occurred May 10, interest rates for federal student loans are set to increase July 1 for the 2017-2018 school year.
A request for comment from the Education Department was not immediately returned.
A president's spending proposal has to go through Congress before becoming a budget, so it's possible these cuts will be tweaked or removed from the final version altogether.
"A college education should be a path to prosperity not a path to indebtedness, but student loan debt is holding back an entire generation and creating a drag on economic growth for our country", said Senator Baldwin.
Because many students and their families have to borrow money each year, continued annual increases could take a significant toll. But the Government Accountability Office has estimated that as many as a quarter of US workers could qualify based on the definition of eligible jobs. 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 lawsuit filed in December claims four borrowers were misled into believing they qualified for the program.
The option to enroll in different payment plans that may lower monthly payments is invaluable to borrowers who can't afford standard repayment amounts. Trump's budget would streamline those five plans into one and change the payment details.
Currently, the interest rate for undergraduate students is 3.76 percent. After 20 or 25 years, depending on the plan, outstanding debt is forgiven.
According to student loan site credible.com, it cost about $36,227 to repay $30,000 in direct unsubsidized student loans at the old 3.76 interest rate. So, undergraduates would pay slightly more month-to-month, but less in the long run.
"Students and their families shouldn't panic about this year's increase, but they should keep in mind that if interest rates continue to go up while they are in school, that will also have an impact on their monthly payment and total repayment costs after they graduate", Dash said.
"Higher federal student loan rates, and more expensive loans for the 2017-2018 school year aren't exactly welcomed news, but some things haven't changed for borrowers as federal student loans are still a better bet than private loans", said Brianna McGurran of the personal finance website NerdWallet. Trump's budget proposal would cut that almost in half, with a $490 million reduction to the Federal Work Study program. Work Study is far from a ideal program-because of an antiquated funding model, a majority of the funds go to older, private colleges, and higher education finance experts argue the money could be better targeted toward lower-income students. For example, the add-on percentage for undergraduate loans is 2.05 percent. Unfortunately, I'm also the guy who covers student debt for Slate, and am one of a tiny handful of national journalists who have given this particular issue more than a passing thought. It can become catastrophic if the borrower has to enter into forbearance for an extended period of time and watch their total loan amount increase because of accruing interest. Subsidized loans, which include the relatively small Perkins Loan program, are reserved for students who demonstrate financial need. It would slash $1.2 billion in funding for after-school programs that serve 1.6 million children, the majority of whom are low-income.
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