The Trump administration Will Be Tough on Student Loans
Here’s how….
1. Opposition to Broad Forgiveness: The administration has stated that “Taxpayers—not students and parents—must not be forced to repay student loans that do not belong to them.”
This administration is broadly opposed to presidential-level debt cancellation plans.
2. Ending Repayment Plans: The administration is moving to terminate certain existing income-driven repayment (IDR) plans, such as the SAVE plans. The financial pain to borrowers will be massive.
3. Changes to PSLF: The administration will propose revisions to the Public Service Loan Forgiveness (PSLF) program, which critics argue is intended to restrict eligibility.
4. Resumption of Involuntary Collections: The Department of Education has resumed involuntary collections for defaulted federal student loans. This includes the garnishment of wages, seizure of tax refunds, and withholding of federal pensions.
5. Stance on Bankruptcy: Federal student loans are already notoriously difficult to discharge through bankruptcy proceedings, compared to most other consumer debt.
The Trump administration might also adopt a more restrictive interpretation of the “undue hardship” standard required for bankruptcy discharge.
There is another looming danger…..
The Trump team is also looking at selling all or part of the nearly $1.7 trillion federal student loan portfolio.
This could be a nuclear option for borrowers.
Trump would not hesitate to give corporate buyers a sweetheart low price….. and then, they could squeeze borrowers without mercy. The entity which buys the loan could collect all the payments, penalties, excess interest, etc. and make a huge profit for years to come.
Trump has always taken the side of helping loan sharks and corporate predators.
In response, a letter drafted by Sen. Elizabeth Warren (D-Mass.) and signed by more than 40 Democratic lawmakers stated:
“Let’s be clear: This sale would be a giveaway to wealthy insiders at the expense of working-class borrowers and taxpayers. It threatens the loss of borrowers’ legally guaranteed protections, and the sale would likely be illegal if the debt is sold at a loss for taxpayers. We urge you to immediately cease any efforts to privatize the federal student loan portfolio.”
Some experts feel that this sale would never happen…….
“Why would anyone buy this portfolio? It’s not clear that, as a freestanding deal, anyone would,” said Ashley Harrington of the Project on Predatory Student Lendiing. “Prior investors in a securitized student debt vehicle, the National Collegiate Student Loan Trust, experienced decades of lawsuits and no returns, and dubbed it one of the worst-performing investments ever created by Wall Street. “
A Final Angle To Consider
“The one argument that I can convince myself does make sense to sell the student loans is that it makes it much harder for a future administration to engage in mass student loan forgiveness,” said Andrew Gillen, research fellow at the Cato Institute’s Center for Educational Freedom.