[yt_dropcap type=”square” font=”” size=”14″ color=”#000″ background=”#fff” ] W [/yt_dropcap] hile the intelligence of the average American to vote for Trump and have him elected as the head of the country is still questionable, here’s one bit of good that just might come out of this whole orange-haired mess! The man’s foreign agenda seems to be quite dubious especially his silence on African affairs, but if the man succeeds in delivering his local promises, people who borrowed student loans and rely on an income-based repayment plan to clear their debt might be looking at a favorable deal down the four years of his presidency.
The highlights of his proposal include borrowers having to pay higher monthly loan repayments, but as a trade-off would have their debt forgiven much sooner than what current repayment plans have to offer. Typically borrowers have to pay 10 percent under current repayment plans with forgiveness periods between 20 and 26 years. Trump’s proposal, on the other hand, has monthly talks about repayments at a rate of 12.5 percent with forgiveness attainable by up to 15 years.
It must be noted that these income-based repayment plans are exclusively available to those who opt for federal student loans, and not any other form of private student loan facilitation. Over the last few years, the percentage of students who’ve opted or an income-based repayment plan has increased four times from a meager 5 percent in the year 2012 to 20 percent in the current year. Out of these borrowers, people who land jobs that pay relatively well still manage to clear their student debt within the 15 years period, while low-income workers are most likely still going to have a hard time as the interest continues to grow on their loan.
However, Trump’s proposal is more likely to benefit low-income borrowers more than those with jobs that pay better simply because the repayment period ends faster while they still have outstanding debt.
The flip side is that the money that borrowers end up saving and the deficit of payments that is created comes at the cost of the government and taxpayers. Hence before Trump’s proposal is actually implemented, the possibilities need to be weighted carefully considering that the Department of Education already devotes about $11 billion from the total allocated on income-based repayment plans each year.
While Trump has yet to figure out how his grand design of forgiving outstanding student debt would be supported by the role of the government and taxpayers, it certainly isn’t too hard a task to get something favorable approved. For starters, he doesn’t really need the help of Congress. In fact, it could be achieved through a regulatory process just as two new repayment plans were created under the Obama government.
Having said all of this, loan forgiveness doesn’t really let borrowers completely off the hook. The amount of debt that ends up being canceled under a repayment and forgiveness plan ends up being taxed as income.