President Donald Trump’s budget proposal for fiscal year 2018, created in late May, suggested cuts to some aid for higher education and cuts that could negatively affect students.
Trump’s proposed budget included a $9 billion spending cut to the U.S. Department of Education, a cut that, if implemented, would be felt by new borrowers of Stafford Subsidized Loans and students in work study, as well as those planning to use the public service loan forgiveness program.
“The budget request made some pretty severe cuts to federal student aid programs,” Clare McCann, deputy director for federal higher education policy for New America, a nonpartisan think tank based in Washington, D.C., said. “I think in terms of the targeting they were targeted a lot more to graduate students than undergraduate students.”
Public service loan forgiveness, a program that Trump proposed to cut in his budget, would have a bigger impact on graduate students, McCann said.
The program forgives the debts of public service employees, including people who work for government and nonprofit organizations, after they have been paying their debts for 10 years using an income-based repayment plan. The first application for public service employees to apply to have the remaining balance on their direct loans forgiven is supposed to be released in October.
“Since only payments made after Oct. 1, 2007, can be counted toward PSLF, the earliest that any borrower will be eligible to apply for PSLF is fall 2017,” according to the Federal Student Aid office website, referring to loan program.
If the program is cut, graduates who were planning to apply to the public service loan forgiveness program would have to finish paying their income-based repayment plan, possibly for an additional 10 years.
Preston Cooper, an education data analyst for the American Enterprise Institute, believes the purpose of the public service loan forgiveness plans — to be an incentive for graduates to go into public service — is not necessary.
“If you have income-based repayment, then your payments are guaranteed to be affordable no matter what,” Cooper said. “There's really no need to have that extra enticement to going into low-waged public service jobs because your debt is going to be affordable.”
Trump has proposed adjusting those income-based repayment plans so undergraduate students would pay 12.5 percent of their incomes for 15 years, and graduate students would pay that for 30 years. Students generally pay about 10 percent of their incomes for 20 years. The proposed plan would benefit undergraduates by having them pay off their loans for five fewer years.
“(Trump’s) changes to income-based repayment are far more severe for graduate students,” McCann said. “That actually provides an additional benefit for undergrads.”
More undergraduate students fail to pay off their loans than graduate students, which is one way the proposed revision to income-based repayment plans would be beneficial for undergraduates, Cooper said. Graduate students make more money, so it is easier for them to pay off their loans, Cooper said, which is why he thinks graduate students should not be the group taxpayers are giving money to.
“I think it's pretty clear that undergraduate student borrowers are the ones who are more in distress, who are having more trouble paying back their loans,” Cooper said. “Graduate students just earn more.”
Another change to financial aid that would affect undergraduate students is the proposed cut of the Stafford Subsidized Loan, a loan that does not accrue interest until students leave school and enter repayment, McCann said.
“When you leave, you leave with the amount you borrowed, not with more,” McCann said. “This proposal would eliminate that interest subsidy so you can basically expect to leave with more than you originally borrowed on those loans.”
Students, especially those who are low-income and first-generation, also use work study and Pell Grants to offset cost. Under the proposed budget, the funding for work study would be cut in half, but the Pell Grant would be given out year-round, which would add the opportunity to use it over the Summer Semester.
Carrie Warick, the director of policy and advocacy at the National College Access Network, said in an email that cutting work study could cause students to go to jobs that would not have flexible hours for students.
“If students aren’t able to work on campus, they likely will need to find off-campus jobs that require more time commuting and less flexible hours,” Warick said in her email. “These factors make it harder for students to focus on their academic work, which could hurt their ability to graduate on time.”
McCann said the inclusion of the Pell Grant in the budget was heartening, but she wishes the Trump administration would link Pell Grant size to inflation, a policy that expired at the end of the 2016-17 award year.
“For the past couple of years, the maximum size of the Pell Grant has been tied to inflation,” McCann said. “The fact that that's going away now means that the Pell Grant award size is going to stagnate.”
McCann said that tying the Pell Grant to inflation means Pell Grant would increase and help better offset the cost of tuition.
The budget still has to be approved by Congress later this year, meaning that, at the moment, all these cuts to higher education are still just theoretical. Cooper hopes that Congress will evaluate the budget and make changes to find the best solutions.
“The Trump administration's proposal can be one of the things on the table, but it shouldn't be the be all and the end all,” Cooper said.
