It’s one thing to claim to “love the poorly educated,” as President Donald Trump once declared. It’s another to re-engineer American society to become much more poorly educated. But that’s exactly what the Trump administration’s 2018 budget proposal attempts to do.
According to two pieces from The Washington Post published Wednesday, not only will the budget include the disappointing $5 billion in cuts to programs for low-income students that the administration unveiled in March, but it also proposes additional draconian policy changes that will raise student debt burdens and eliminate sought-after loan forgiveness.
For example, the Post reports that the budget would wind down the subsidized Stafford Loan program, which provides interest-free loans while in school. That alone could shift more than $20 billion in costs onto students over a decade.
The budget also seeks to end Public Service Loan Forgiveness, an option that forgives loans for dedicated public servants after 10 years of successful repayment. Ending the program could force many future debt-burdened graduates to give up on careers as teachers or social workers. It is not clear from the Post story if the Trump administration would end the program for all borrowers or new ones. However, past attempts by the Obama administration to reform the program had only applied to new borrowers.
Other new proposed cuts detailed by the Post include $168 million for career and technical education; $96 million for adult basic literacy instruction; and ending a $15 million program that provides child care for low-income parents in college.
In a sign of just how cynical and punitive this budget is, none of these cuts are being made to funnel money into new or different higher education programs that try to better tailor funding to the most vulnerable. To the contrary, the effect is just to take billions of dollars away from college students. Period.
While the suggested cuts are scary enough, here’s a closer look at who would be particularly hurt if Congress enacted these changes and how much students stand to lose.
Ends loan subsidies for undergraduate students
The newest blow to students in Trump’s budget is a proposed phasing out of subsidized loans for undergraduates. Currently, the federal government pays the interest that accrues on federal student loans for students with financial need while they are enrolled in school, during their six-month grace period after leaving school, and if they go back to school. In 2015-16, more than 6 million students borrowed more than $23 billion in subsidized loans, most of whom also received Pell Grants for low-income students.
According to the Congressional Budget Office, eliminating subsidized loans entirely would shift $27 billion in costs on to students over a 10-year period. A phased elimination would cost students slightly less, but the amount will still be substantial.
Future borrowers will feel the pain from this change. Students can currently take out a maximum of $23,000 in subsidized Stafford Loans. Borrowers who did this under past interest rates would owe about $235 per month under a standard, 10-year repayment plan. Should these loan subsidies disappear, their monthly payment would jump to $279, an increase of almost 20 percent. Furthermore, the amount of interest these students would pay over the repayment term would go up by more than $5,200. This money would not be put to another use for students—instead, it would go right from their pockets into deficit reduction and tax cuts for millionaires.
This move could also encourage students with financial need to borrow more. When students who are eligible for both subsidized and unsubsidized loans see their award letter, some may to forgo the more expensive unsubsidized debt and just borrow the subsidized loan. Without a less expensive option on their award letter, students may instead borrow the entire amount for which they are eligible—increasing their loan balance, the amount of interest their debt accrues, as well as their monthly payments.
Freezes the Pell maximum while raiding the surplus
The good news: The budget does not propose to cut the maximum Pell Grant award from its current level of $5,920. The bad news: There is no provision to increase the award with inflation. Freezing the grant even as tuition keeps climbing will continue to chip away at college affordability. Today, the Pell Grant only covers 30 percent of the cost of attending a four-year public college. Without new increases over the next 10 years, and assuming tuition growth continues at its recent rate, the maximum award would only cover 23 percent.
And it gets worse: The budget continues a push to cut $3.9 billion from the surplus the program accumulated over several years. While this change does not affect how much money students get next year, it puts the program on much weaker footing, raising the chance that it could run a deficit if costs rise due to a recession. To put this cut in perspective, $3.9 billion would fund Pell Grants for every student in Texas and North Carolina for a year.
Continues current law with year-round Pell Grants
Unlike the skinny budget, the full budget includes funding for year-round Pell Grants. But the Trump administration cannot claim credit for the policy change. The bipartisan 2017 budget agreement struck weeks ago already brought the program back.
Just like in the skinny budget, the full budget eliminates all funding for the Supplemental Educational Opportunity Grant (SEOG). The SEOG provides $732 million in additional grant aid to nearly 1.6 million students. Roughly 81 percent of students who receive SEOG come from families earning less than $30,000 a year or independent students who are more likely to be low income. Another 16 percent goes to families making between $30,000 and $60,000 per year.
Halves Federal Work-Study, putting other benefits at risk
The budget also proposes halving the Federal Work-Study program with a $487 million cut. The Work-Study program provides subsidized employment for nearly 700,000 students, including jobs on and off campus. Under the Work-Study program, 44 percent of funds go to families earning less than $30,000 and 20 percent go to families earning between $30,000 to 60,000 per year.
Cutting Federal Work-Study also has potentially significant implications for students’ ability to access other public benefit programs offered by the federal government. While it can be difficult for low-income students to access public benefit programs, those who have Federal Work-Study jobs are automatically eligible for the Supplemental Nutrition Assistance Program (SNAP). This cut is particularly depressing given that approximately half of all college students struggle with hunger, including many who already receive SNAP.
Terminates Public Service Loan Forgiveness
Trump’s budget also proposes ending the Public Service Loan Forgiveness (PSLF) program, which allows borrowers to have loans forgiven after making 10 years of qualified payments and working in government service or approved nonprofits. The program began in 2007 and, to date, more than 500,000 borrowers have filed forms verifying they work in a qualifying public service job. This likely understates the number of borrowers hoping to use this program because the forms are optional. The Post report is unclear about whether this termination will impact borrowers that are already working toward earning this benefit.
Changes the terms of income-driven repayment
The budget also proposes reducing the number of income-driven repayment (IDR) options to just one. Under the new plan, students would be required to pay 12.5 percent of their discretionary income—earnings after subtracting money to cover living expenses—instead of the 10 percent required under the two most recently introduced IDR options: Pay-As-You-Earn (PAYE) and Revised Pay-As-You-Earn (REPAYE). For undergraduates, the repayment period would drop from 20 years to 15, while graduate degree seekers would see an increase in their repayment time from 25 years to 30.
This proposal is unequivocally a lousy deal for graduate borrowers. While graduate students are less of a policy priority than undergraduates, giving a student loan the same repayment timeline as a mortgage is just too long. If the concern here is about excess borrowing for graduate programs, getting at that through increased accountability is a better and more efficient path than forcing borrowers to pay for most of their working lifetimes.
The suggested payment plan would be more of a mixed bag for undergraduates. It’s definitely worse for those who had been hoping to receive forgiveness after 10 years through PSLF. Compared to existing IDR options, whether the plan is better or worse depends on how much of a borrower’s loan would be left at 15 years versus the potential difficulty of payments that are 25 percent higher each month.
Cuts to what end?
In its first budget agreement hashed out a few weeks ago, this Congress allocated slight increases to higher education programs and brought back year-round Pell Grants. However, the next budget deal will be much tougher. Absent congressional action, overall spending levels will be a lot lower for fiscal year 2018. Since 2013, Congress has operated under bipartisan budget agreements that lifted punitive caps on the overall amount of money it could spend—what is known more formally as the sequester. There is no similar agreement in place for the upcoming FY, meaning Congress would have to cut spending by tens of billions of dollars. If legislators cannot find a way to lift the spending caps again, then the subsequent required cuts will be ugly and massive.
This budget suggests the Trump administration would be perfectly fine pushing billions of cuts onto vulnerable students. Plenty of administrations have proposed changes to higher education programs in order to make them better targeted to low-income populations, serve students better, or otherwise improve the use of taxpayer dollars. The Trump budget is not that: It’s a cynical exercise in cutting assistance for students to reduce the deficit and finance tax cuts for millionaires. There’s no corresponding help for the people who will have benefits taken away. The current federal financial aid programs may be complicated but simplifying them by making changes that leave students worse off is not progress.
Marcella Bombardieri is a senior policy analyst on the Postsecondary Education team at Center for American Progress. Colleen Campbell is the associate director on the Postsecondary Education team at the Center. Antoinette Flores is a senior policy analyst on the Postsecondary Education Policy team at the Center. Sara Garcia is a research associate on the Postsecondary Education team at the Center. CJ Libassi is a policy analyst on the Postsecondary Education team at the Center. Ben Miller is the senior director of the Postsecondary Education Policy team at the Center.
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