Student Loan News: Student Aid Cuts Proposed; Felicity Huffman in College Scandal

Welcome to Student Loan News, a weekly summary of developments and events affecting college debt in the U.S. Join us each Friday for a look at goings-on that could impact your own student loan situation.

Trump proposes 12% cut to education funding

As he did in his previous two budget requests, President Trump asked for a cut to funding for the U.S. Education Department. The proposed budget would slash $7.1 billion from programs while canceling surplus funds in the Pell Grant program, eliminating subsidized student loans, and putting an end to the Public Service Loan Forgiveness (PSLF) program, according to reports by CNBC, Inside Higher Ed and others.

The proposal also involves a “skin in the game” provision for colleges that accept federal funds. This addition might require colleges to pay if their students default on federal student loans, though the details of how exactly it would work remain unclear, the Washington Post said.

The budget proposal also seeks to reduce the number of income-driven repayment programs to just one. This single income-driven plan would cut borrowers payments to 12.5% of their discretionary income and offer loan forgiveness after 15 years for undergraduates (five years sooner than some current plans allow) and after 30 years for graduates (five to 10 years later than current plans offer).

Assistant Secretary of Education Jim Blew told reporters: “We’re coming back again asking for a reduction because the administration believes that we need to reduce the amount of discretionary funding for the Education Department.”

But few expect these budget cuts to pass, as they’ve been rejected by a Republican-led Congress in the previous two years and are even less likely to get through with today’s Democrat-led House.

How it affects YOU: In all likelihood, this budget proposal won’t make it through Congress, so you don’t have to worry about subsidized student loans or PSLF disappearing overnight. That said, keep an eye out for changes to federal programs and repayment plans, just in case funding priorities get shifted around in the future.

What’s more, the current system of income-driven repayment plans still stands, so explore your options — which include Income-Based Repayment, Pay As You Earn, Revised Pay As You Earn, and Income-Contingent Repayment — if you’re looking for a way to adjust your monthly student loan payments and ultimately get loan forgiveness.

Senate agrees to simplify the FAFSA for students

As we detailed last month, there’s been recent talk about how to simplify the FAFSA to make it more accessible to families seeking financial aid. As of a hearing on Tuesday, the Senate is ready to move forward with bipartisan legislation that would reduce the number of questions on the FAFSA from 108 to 15-25, Politico reported.

Among other reforms, this legislation would allow students to fill out the FAFSA on their own and to find out as early as eighth grade how much Pell Grant funding they might expect to receive. What’s more, families would be able to apply for financial aid sooner because they’d be able to use information from the previous year’s tax returns.

Discussions about simplifying the FAFSA have been in the works for the past five years, but this hearing could represent a big step forward, with the reform measure looking more likely to be enacted.

How it affects YOU: If you’re a soon-to-be college student (or parent of one), expect the FAFSA to become a lot simpler in the future. Although there’s no stated start date for these changes, students and their families should have an easier time applying for federal financial aid in the years to come.

FBI charges 50 in college admissions bribery scandal

You might not have been shocked by the news that wealthy families are buying their kids’ admission to top universities — but none of us expected Aunt Becky of “Full House” to be among those accused.

On Tuesday, the FBI charged 33 parents (among them actresses Lori Loughlin and Felicity Huffman), an owner of a college counseling firm, an exam proctor, a college administrator and college athletic coaches in the “largest college admissions scam ever prosecuted by the Department of Justice,” according to CNN and other reports.

Federal authorities allege that the parents involved paid over $25 million to ensure their children’s admissions to elite schools such as Yale, Stanford, and UCLA. In exchange for bribes, some coaches allegedly accepted students as athletic recruits despite their never having played the given sport competitively. And an SAT proctor is reportedly charged with correcting students’ answers on the SAT to get them a higher score.

The charges in this case include mail fraud, racketeering, money laundering, obstruction of justice and conspiracy to defraud the government.

How it affects YOU: Unfortunately, it’s no secret that the college admissions system tends to favor students and families in positions of privilege. From private college counseling to personal statement editing, wealthier students tend to get extra assistance navigating the college admissions process.

What’s more, entrance exams such as the SAT and ACT have been shown to be biased toward students from high-income families. While these rampant problems probably won’t be going away anytime soon, this case is at least shedding a light on inequities within the college admission process.

Also in the news…

  • While the Senate was tackling FAFSA simplification, the House was talking about what to do about for-profit colleges, Politico reported. Various critics testified, including a veteran who says he was scammed by DeVry University.
  • According to Roll Call, 68 members of Congress have their own student debt or have family members with debt. Collectively, Democrats and Republicans owe $2.5 million for higher education — so this issue is close to home.
  • Student loan lawyer Adam Minsky penned a piece for Forbes about student loan reforms to watch out for in 2019. Among them, Minsky cites free tuition colleges, bankruptcy reform, and the introduction of a federal refinancing program.
  • Although we’ll have to wait to see if the government will offer student loan refinancing, Democrats in the state of Wisconsin are pushing for a state-run refinancing program to ease the burden on borrowers, the Capital Times reports.
  • In lighter news, there’s a new trivia app that’s awarding winners with money to pay off student loans. To date, the Givling app has paid out more than $2.5 million to its trivia-savvy winners, according to Fox News affiliate WBRC. Looks like that college degree is finally paying off.

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