President Trump’s budget for fiscal 2021 dropped this week, and it’s a doozy. Among the hundreds of pages of planned changes, you’ll find that Trump wants to cut $5.6 billion from Department of Education funding—that’s a 7.8% decrease.
The 2021 budget would implement some big changes to the ways we take out and pay back loans for higher education expenses.
Take a look at some of the key cuts Trump wants to make:
- Eliminating subsidized Stafford Loans, which don’t accrue interest while you’re enrolled.
- Eliminating the Supplemental Educational Opportunity Grant, which typically goes to independent students or those whose families make less than $30,000 per year.
- Cutting $630 million of funding to the Federal Work Study Program.
- Reducing income-driven loan repayment programs to one option. Instead of paying 10% of your income, you’d pay 12.5%. Payment plans would last 15 years instead of 20, with the remainder forgiven, but graduate students would have to make payments for 30 years under income-driven repayment.
- Eliminating the Public Service Loan Forgiveness program.
Inside Higher Ed notes that Trump has proposed cuts to higher education during every year of his tenure. This is not the first time he’s floated plans to eliminate the Public Service Loan Forgiveness (which was in last year’s budget) and Supplemental Education Opportunity Grant programs (a repeat from the FY 2019 budget).
The Center for American Progress estimates that the cuts to financial aid would lead to an additional $70 billion in costs to loan borrowers over 10 years.
There are a few positives in the budget, including the following:
- Reinstating federal Pell Grant eligibility for short-term education programs and for some currently incarcerated students who are being released within five years.
- Increasing career and technical education funding by $900 million.
- Putting caps on graduate and parent loans with annual and lifetime limits. Parent PLUS loans for undergrads would be limited to $26,500. Graduate students would be capped at $50,000 annually and $100,000 total.
Congress lifted caps on student loan lending in 1992; doing so allowed parents to start borrowing up to the full cost of attendance for their child’s education with just a credit check, according to Inside Higher Ed.
While the proposed changes seem severe, remember that the budget is basically just a long, wordy suggestion card that the president drops off to Congress.
“The White House budget is generally viewed as a political messaging document,” The New York Times points out. “Congress, which is responsible for approving government spending, is under no requirement to adhere to White House requests.”
Of course, there’s another big wrinkle in Trump’s budget plan: His ability to encourage Congress to make his plans reality relies in part on him getting reelected in a few months; the federal governments fiscal year 2021 starts in October 2020.
But as we’ve discussed before, a president or president-elect can only do so much to enact their own policy goals, thanks to that whole balance of power thing the founding fathers cooked up. So while the budget is worth keeping an eye on, don’t expect any sweeping changes to your loans or repayment plans just yet.
This post has been updated to correct the federal government fiscal year.