Oct. 14, 2016 The earliest you can have debt forgiven under current plans is 20 years.Democrats have used generous student loan repayment plans and dramatic proposals about cutting the cost of college as a way to court young voters this election.
Now Donald Trump is doing the same.
The GOP candidate promised at a campaign event in Columbus Thursday that if elected, he’d implement an income-based repayment plan that’s more generous than any of the existing government plans. Graduates would pay 12.5% of their income for 15 years before the remaining balance would be forgiven. Trump also said he turn a “confusing maze” of
repayment plans into one simple income-driven option. Democrats and consumer advocates have also pushed for reducing the number of repayment plans to make it less confusing for borrowers.
“The debt should not be an albatross around their necks for the rest of their lives, and that’s what it is,” Trump
said in the speech. “We’re gonna work it out.”
About 4 million borrowers are currently enrolled in an income-based repayment plan, a number that’s surged in recent years. Yet the earliest you can have debt forgiven under those plans is 20 years. Current versions of income-based repayment were developed during George W. Bush’s administration and limited payments to 15% of income, with outstanding debt forgiven after 25 years. The Obama administration then built on that, lowering the payments to 10% of income with a 20-year period for forgiveness, and more recently, the government
expanded who qualifies for income-driven plans.It’s worth noting, though, that under current plans, any debt that’s forgiven is considered taxable income, so borrowers could still be left with a tab to the IRS in thousands of dollars, depending on how much is forgiven. Trump didn’t specify in his speech whether amounts forgiven would also be taxed, and one sentence in the speech sounded as if Trump might eliminate Public Service Loan Forgiveness, which forgives the debt of government and non-profit workers after just 10 years, in favor of putting all borrowers in the same plan.
Income-based repayment plans have been largely heralded by student and consumer advocates. But some economists and many Republicans have criticized them as too expensive and even regressive, since the borrowers who receive the biggest boost from forgiveness are graduate degree recipients with unusually high six-figure debt.
