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President Trump is asking Congress for a number of changes to the federal student loan program. Currently, eligible student borrowers can take advantage of “income-driven repayment” (IDR) options to repay their student loans. Five of these plans exist currently, with overlapping terms and eligibility rules.
Trump would streamline these into one single plan, reflecting a promise made on the campaign trail.
Under current IDR rules, new borrowers may repay 10% of their discretionary income for 20 years, after which their remaining balance is forgiven. Trump’s proposal would increase that income share to 12.5% for new borrowers. However, borrowers with solely undergraduate debt would receive forgiveness after just 15 years, while borrowers with any graduate debt would have to wait 30 years. This change is ambiguous for undergraduate borrowers and unambiguously negative for graduate borrowers. But since making loans to graduate students is expensive, the savings are immense—an estimated $76 billion over 10 years.
There’s a further wrinkle to IDR under the current regime, though. Borrowers who work in “public service” jobs—defined as work at any level of government and most nonprofit organizations—can have all their remaining loans forgiven after only 10 years. Naturally, this also benefits graduate borrowers: loans with high balances and high interest rates take longer to pay off, so faster forgiveness is a major boon. Trump would eliminate this program, known as “Public Service Loan Forgiveness” (PSLF), saving $27 billion over 10 years.