Buzz
President Trump's proposed budget for fiscal 2021 was unveiled this week, and it’s a major shift. Within the extensive plan, you’ll notice a proposed $5.6 billion reduction in funding for the Department of Education—representing a 7.8% cut.
The 2021 budget seeks to bring significant changes to the way we borrow and repay funds for higher education costs.
Here’s a glimpse at some of the major cuts President Trump is pushing for:
Eliminating subsidized Stafford Loans, which do not accumulate interest while you are still enrolled in school.
Phasing out the Supplemental Educational Opportunity Grant, which typically assists independent students or those from families earning less than $30,000 annually.
Cutting $630 million in funding from the Federal Work Study Program.
Reducing income-driven loan repayment programs to a single option. Instead of paying 10% of your income, the new plan would require 12.5%. Repayment terms would shrink from 20 years to 15, with any remaining balance forgiven, but graduate students would face 30 years of payments under income-driven repayment plans.
Ending the Public Service Loan Forgiveness program.
According to Inside Higher Ed, Trump has consistently proposed reductions in higher education funding during each year of his presidency. This isn’t the first time he’s suggested eliminating the Public Service Loan Forgiveness program (which was included in last year’s budget) and the Supplemental Education Opportunity Grant programs (a repeat from the FY 2019 budget).
The Center for American Progress predicts that cuts to financial aid would result in an extra $70 billion in costs for loan borrowers over the next decade.
There are a few positive aspects within the budget, including the following:
Reintroducing federal Pell Grant eligibility for short-term education programs and some currently incarcerated students who are set to be released within five years.
Increasing funding for career and technical education by $900 million.
Introducing limits on graduate and parent loans, with both annual and lifetime caps. Parent PLUS loans for undergraduates would be limited to $26,500. Graduate students would face caps of $50,000 annually and $100,000 total.
In 1992, Congress removed limits on student loan borrowing, allowing parents to borrow up to the total cost of their child's education with just a credit check, according to Inside Higher Ed.
Although the proposed changes may seem drastic, keep in mind that the budget is essentially a lengthy suggestion the president submits to Congress.
As The New York Times notes, “The White House budget is generally viewed as a political messaging document. Congress, which is responsible for approving government spending, is under no obligation to follow White House proposals.”
A major factor in Trump’s budget plan is the president's need for re-election to influence Congress and make his proposals a reality; the federal fiscal year 2021 begins in October 2020.
However, as we've discussed before, a president or president-elect can only achieve so much in pushing their policy agenda, thanks to the separation of powers established by the Founding Fathers. So, while it’s worth keeping an eye on the budget, don’t expect significant changes to your loans or repayment options right away.
This post has been revised to correct the fiscal year of the federal government.
