What The 'Building A Better America' Budget Means For Student Loans

The House Budget Committee has just rolled out a first pass at a new federal budget titled Building a Better America .

People dealing with student loans had better start thinking quickly and clearly if their political ideology is more important than the future of student loan debtors.

Here are a couple of choice sections.

“The Federal Government holds most student loan debt; as of the first quarter of 2017, its portfolio was $1.29 trillion, up from roughly $516 billion in fiscal year 2007. As Federal lending consumes an ever-larger share of the student loan market, it crowds out private and other lenders that may have better products to meet borrowers’ needs.”

It would appear the argument is the government wants to get out of the student loan market and drive more people to private student loans which don’t have any of the payment options, forgiveness programs, or helpful options federal loans have.

“Account for the True Costs of Student Loans. By statute, the government’s accounting procedures for assessing the costs of student loan programs do not incorporate market risk. For example, borrowers may have trouble finding a job and repaying loans in an economic downturn. To measure student loan program costs, the budget recommends using fair value accounting, which does assume such market risk.”

While the budget may recommend fair value accounting, the Department of Education is busy trying to gut regulations protecting students from underperforming schools which lead to failed educations and problem debt. The administration can’t have it both ways.

“In areas such as health care, welfare, environmental regulation, education, workforce development, and transportation, we put federal spending on a budget and empower the states, which are best suited to address the individual needs of their citizens and communities.”

I get the philosophy of returning more responsibility to the states but won’t this just create an inequity in the ability of individuals to plan for education when there may be a patchwork of education initiatives by state instead of one federal regulation when it comes to student loan and education issues?

“Simplify and Streamline Higher Education Programs and Financing to Protect Students and Taxpayers. The current Federal aid system is complicated and time-consuming for students and parents trying to make higher education financing decisions. In addition to Federal grant aid, six loans, nine loan repayment plans, eight loan forgiveness programs, and 32 options for loan deferment and forbearance exist. Each program has different eligibility criteria and terms. The budget envisions a simplified, transparent, and fiscally sustainable aid system. Principles for reform include more transparency for loans and repayment plans, removing perverse incentives to over-borrow, consolidating the array of programs, and protecting taxpayers.”

While it is possible that some changes could be made in the loan options, forgiveness programs, and repayment options, the key question here in a budget that is poised to trim costs is what will be cut and eliminated? The administration has already indicated they would like to like to change income driven repayment programs to make them shorter but have higher monthly payments. The Trump administration also would like to make wholesale changes or eliminate forgiveness programs like the Public Service Loan Forgiveness program .

I’d love to hear your opinion. Do you think the changes proposed in this budget will help to make American education great again? Post your comments below.