Here’s an irony for you…
While President Trump’s most ardent opponents are college-educated elites – who insist he’s the dumbest man ever to occupy the Oval Office – Trump’s plan to cut student loan debt would help them out the most.
Oh, and it’s nuanced and based on sound business principles that defy the stereotypical insults hurled at the businessman every day.
The United States has a combined total student debt of $1.3 trillion. Who would know better how to deal with that debt than Donald Trump, the man who rebuilt his father’s fallen real-estate empire?
Let’s start with the basic facts. The federal government backs two big types of loans: subsidized and unsubsidized. Subsidized loans don’t accrue interest while the student is in college, unsubsidized do. That’s an oversimplification, but that is the big difference.
Trump’s plan is aimed at helping the majority (85 percent) of post-high school students; and it’s more sound and helpful than former President Barack Obama’s loan forgiveness layout.
Obama’s plan vs. Trump’s
A vast majority of college students threw their support behind President Obama. He was hip, he was kind, and he was there for them. Or so it seemed.
Under Obama’s plan, students meeting the income requirements only pay 10 percent of their income. After 20 years, the loan is forgiven. Like most things to come out of the Obama White House, it’s about feeling good, not doing good.
Trump’s plan doesn’t care about your feelings. It’s all action. He starts off with students paying more upfront for their loans: 12.5 percent of their income. But here’s where the business savvy kicks in: He offers forgiveness 5 years earlier than Obama.
As a result, students pay less in the long run. Significantly less.
Don’t take my word for it. The Brookings Institute did a study to see how this would affect the average student. If you know that research group, they are about as middle-of-the-road as you can get. Let me break down their findings for you:
An average student graduating with a $35,000-per-year job would pay nearly $11,000 less with Trump’s plan than the current Obama plan.
I can see the wheels turning in your head. It seems too good to be true.
You would appear right, at first. Liberals will point out Trump’s loan forgiveness plan eliminates the subsidized loans from eligibility. “It’s an attack on poorer students,” they’ll cry.
Check the facts.
That same Brookings study found elimination of the subsidized loan would add — on average — $3,600 to the loan bill. That adds up to $4 more a month under Trump’s payback plan.
Here’s where that cry goes out the window. Since Trump’s loan forgiveness plan ends five years earlier, even with the added interest, the “poorer student” would pay nearly $5,000 less. These are thousands of dollars going back into the pockets of the graduates, not just nice feelings. Who says Trump only cares about the wealthy?
What about graduate students?
I don’t want to overstate the obvious, but the plan would also significantly bring down new national student debt.
Trump is a businessman. Part of running a business is teaching employees about responsibility. That lesson goes to the most well-educated of pupils: graduate students.
During the “Era of Feeling Good,” President Obama offered a blank check-esque forgiveness plan to graduate students. Students can borrow as much as they want, no penalties. After 20 years, it’s forgiven.
Under the Trump payback plan, a graduate student would have to wait 30 years before forgiveness kicked in. In effect, if you’re looking for graduate school, find one that gets the most bang for your buck. The smartest and most educated will have to use that to find a reasonable graduate degree, because you’re going to pay most of it back.
The art of this deal is that overall it brings down student debt by the billions. That’s huge. But it also puts the postsecondary education world on notice. Trump wants college costs under control.
When loans are guaranteed by the government, it offers no incentive for colleges and universities to charge reasonable rates for tuition. Charge what you want, since Uncle Sam is footing the bill.
That’s what we’ve seen. Astronomical college bills and for what? A degree that gets you a salary that wouldn’t even cover one year’s tuition? No thanks.
Not anymore, there’s a new sheriff in town. Trump campaigned as a populist. Here he is. This plan helps the majority of college students work out of debt — even if most of them didn’t vote for him.
You gotta ask them: If Barack Obama pitched it, would they like it more?
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Article last modified on December 28, 2018. Published by Debt.com, LLC . Mobile users may also access the AMP Version: Donald Trump Wants People To Pay More For Student Loans – But Also Less - AMP.
Article last modified on December 28, 2018. Published by Debt.com, LLC .