How the new Administration will affect your student loan debt

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With student loan debt on the rise and more borrowers struggling to make their monthly payments, many people are anxiously awaiting the direction President Trump’s administration will take on student loans.

Those hopeful for the new administration’s approach to student loan debt look to campaign promises demonstrating favorable repayment plans and student loan forgiveness.  Others are left more concerned, wary of the administration’s more recent actions foreshadowing the intention to dismantle regulation that may protect borrowers against predatory bank practices.

Below we evaluate a few areas in which the new administration may impact your student loan debt.

Trump campaign promises capping repayments and expanding debt forgiveness

In October of 2016, then Republican presidential candidate Donald Trump proposed new student loan guidelines that would cap total repayments at around 12.5 percent of a student loan holder’s income for 15 years from their graduation date. After 15 years, the proposal would forgive the rest of the student loan holder’s debt.

However, experts believe that hardline conservatives in the House and Senate will block any attempt by President Trump and his administration to fully implement any student loan debt forgiveness. Some feel that President Trump’s stance on student loans isn’t consistent with Republican ideologies, especially income-driven repayment programs proposed by the president.

According to a survey from Student Loan Hero, nearly 45 percent of student loan holders want the new president to implement debt forgiveness after the 15 years he proposed, and more than 33 percent of respondents stated that proposal is the one they want to see implemented right away. Currently, some borrowers receive student loan debt forgiveness through a few programs.

The Public Service Loan Forgiveness is one program that eliminates student loan debt by working in qualified public service positions and making 10 years of timely payments after October of 2007. However, most student loan holders do not qualify for the program, and there is speculation that the Trump administration and the Republican-controlled House and Senate may cap the debt forgiveness or eliminate the program entirely.

Many student loan holders also want the new administration to implement federal programs that allow borrowers to refinance their loans. The only option borrowers have now is debt consolidation through the Department of Education. Borrowers can refinance their student loans through private lenders, but the pitfall is debt holders permanently lose their access to any debt-repayment programs.

Experts believe that any changes to the federal government’s current policies will not occur until sometime in 2018. In the meantime, borrowers are still unsure about how the new administration will impact student loans.

According to the Student Loan Hero survey, about 40 percent of student loan debt holders believe the Trump administration will have a negative impact on student loans, while 40 percent believe the administration will have neither a positive or negative effect.

The new administration and the future of the CFPB

In February, President Trump signed an executive order requiring an extensive review of the Dodd-Frank Act that was put in place in 2010 in response to the mortgage meltdown of 2008. The President made no secret of his dislike of the Dodd-Frank Act during the campaign, calling it a “disaster” and taking action now to “dismantle” the entire legislation.

This is significant as the Act created the Consumer Financial Protection Bureau, led by Senator Elizabeth Warren, intended to work as a watchdog against shady lending practices. However, the Consumer Financial Protection Bureau, known as the CFPB, was a direct result of the Dodd-Frank Act and provides a great deal of protection for student loan borrowers.

Without the CFPB, banks could have more leeway with their lending practices causing the confidence in the types of student loan structures on the market to decrease.

Why the CFPB matters for student debt holders

Earlier in March, the House passed the “OIRA Insight, Reform and Accountability Act,” which would limit the CFPB’s ability to enact legislation as an independent agency. The Trump administration is closely monitoring the roles of independent regulatory agencies since the President signed the executive order to reduce the regulatory burdens created by Dodd-Frank. Since many people consider the CFPB an independent agency, several student loan debt holders are left to wonder if a federal agency will exist to help protect them from predatory lending practices.

The CFPB helps protect student loan borrowers from lenders who charge excessive fees or creating obstacles that prevent people from paying off their debt. In January, the CFPB sued Navient, which is the nation’s largest student loan service provider. The CFPB website states that Navient defrauded or deceived student loan debt holders for years by creating unnecessary obstacles that prevented them from repaying their student loans. Now, many student loan borrowers fear that the CFPB may not exist much longer under the new administration, and they will not have an agency that protects them from predatory lenders or servicers.

One of the biggest concerns among student loan experts is the fear that banks will come up with some type of high-interest loan for students if the new administration dismantles Dodd-Frank. Many in the industry worry that the new president is setting up borrowers for a host of new problems, and not just student loan problems. Experts speculate that if the administration strips down the regulatory power of the CFPB, the nation could face another crisis similar to 2008 when banks were free to create any kind of loan program they wanted without fear of repercussions by the federal government.

It still may be too early to tell exactly where the administration’s policy positions will end as there will be compromises made on both sides of the isle. However, it is certain that broad changes will come, impacting overall loan repayment, forgiveness, and oversight.

Author Bio: Hiro Taylor is the founder and CEO of HeroPay, which helps merchants navigate the complex world of credit card processing. Formerly The Visa Country Manager of Myanmar, Hiro led Visa’s business entry into the country, creating over $300 million in commerce from zero, despite the country’s antiquated telecommunications and banking infrastructure. During Hiro’s tenure, Myanmar was Visa’s fastest growing market globally.

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