Saturday, November 12, 2016

What Is To Be Done? Trump, the Election, and the Student Loan Crises

President-elect Donald Trump delivering acceptance speech in New York, NY on November 9 (Photo Credit: Chip Somodevilla/Getty Images


Ever since now President-elect Donald Trump won the GOP nomination, numerous readers, colleagues, and friends have asked me what I think he'd do about the student loan crisis if he became President of the United States. Since the publication of my book in May, Trump winning the GOP nomination, and now also winning the Presidential election, he and his campaign operatives have been relatively mum on this particular crisis or rather crises (its complexity is such that it is not a singular crisis, so I am shifting the way I describe it). In any event, I have tried to find information on actual policy plans to help understand how his administration's higher education policies would impact the following groups:

  •  Prospective college students 
  • Current college students 
  • Other folks, mainly family members, loaded down with either their own debt as well the debt of other borrowers, be it children or even friends (so, in a word, all those co-signers) 
  •  Current borrowers (the indentured educated class of which I am a member!)

So, he has been pretty tight-lipped about the student loan debt crises. That said, when he was in Columbus, Ohio on October 9th, he said in a speech there: "Students should not be asked to pay more on their loans than they can afford.”

“The debt should not be an albatross around their necks for the rest of their lives,” he added.

What's potentially good?

With Trump's overall populist message and remarkably anti-establishment rhetoric the nation heard - quite loud and clear - from both he and his supporters, perhaps there will be policies implemented that will favor borrowers. For example, he has already said that he would make changes to the Income-Repayment program. That program of course is already in place and was launched by Bob Shireman, the former head of TICAS.org many years ago. (And, on another note, there are certainly many Trump supporters who are also drowning in student loan debt and barely making it by as a result).

What's the good news about Trump's plan to make some changes to IBR? Well, there are a few things. For starters, it means he won't be eliminating it, which is probably impossible anyway. Second, he said he'd cap repayment at 12.5% of a borrower's income.

He has also indicated that he'd like to forgive loans that are in the REPAYE program sooner than they currently are in place. His forgiveness plan? 15 years instead of 20 years. Of course, there is still that pesky tax issue, the one in which once the loans are forgiven, the IRS will come knocking on your door with a tax on the total amount forgiven, as the loans are considered a "gift." As I have said before, not to get off topic, Republicans and Democrats alike agree that this fact is a big problem. Since Trump has prided himself on skirting taxes, perhaps we could make an argument on this, well, stupid tax, and he'd help let us off the hook? Who knows  . . .

What's most likely bad?

As I already predicted, given how he prides himself on not being a politician but instead a successful businessman (something that is questionable, but I digress), Trump will most likely try to radically revamp who is the service provider of loans (currently, it's the Federal Government). This means that he and the individual he appoints to be head of the Department of Education will try to privatize the student loan industry. Of course, it already is privatized due to vendors who receive lucrative contracts from the Department of Education in order to service loans.* This issue, as I discuss at length in my book, is a murky one, as the Department of Education doles out servicing contracts to private companies** such as Navient (formerly Sallie Mae), PHEAA, and Nelnet. At this juncture, it is hard to say how this plan - if even successful - would play out. One thing is certain, it won't benefit borrowers or taxpayers if it is "privatized" again. But when it comes to all these players, perhaps the big lenders are nervous with the Trump regime assuming power. Only time will tell. But I know one thing - I'd sure love to be a fly on the wall at Navient, PHEAA, or Nelnet, listening to top executives discussing what the future holds now that Trump has won the election.

One thing is certain, we won't see a debt jubilee under the Trump Regime.

At this point, seeing how all of this unfolds in the next 6 months means it is really a waiting game, whether it's related to the student loan debt crises, immigration, or anything else. That uncertainty, not surprisingly, has led to public fear and has also rocked the markets. We are all well aware now, including President-elect Trump, I imagine, that he is erratic and therefore unpredictable.

Final Thoughts and Following Up

Finally, and I am sure this will be pointed out by some of you, so that's why I am getting it off my chest now, I am being quiet on this post about the other enormous issues that deeply concern me about Trump's election, many of which are deeply personal, particularly since I am a woman, am friends with minorities, and believe in spreading love to my fellow human beings. But since I am speaking about the student loan debt crises, I will refrain in this short essay from sharing my thoughts about those other complex and extremely serious matters. Rest assured, I will write another piece to discuss those topics soon.

Stay tuned for more analysis as President-elect Trump receives the keys to the White House.


FOOTNOTES

*For the sake of keeping this post on point, I am generalizing here, as there are also the collection agencies as well as the Guarantee Agencies who receive contracts, too.

**The Department of Education is the service provider of student loans. That policy change occurred with the passage of the Health Care and Education Reconciliation Act of 2010. To further clarify, this made 100% loans direct loans, thus bringing an end to the FFEL program (meaning that FFEL loans were no longer distributed after that year; however, debt owed to FFEL remain. I myself have several large FFEL loans, along with millions of other borrowers, so that debt remains on the books).

Sources:

Ted Mitchell, Under Secretary, U.S. Department of Education, memorandum, July 20, 2016, "Policy Direction on Federal Loan Servicing." (Accessed online November 12, 2016)

Nerdwallet, "5 Ways President Trump could affect your student loans," Los Angeles Times, November 11, 2016. (Accessed online November 12, 2016)


10 comments:

Anonymous said...

Two words: Trump University

Michael K. Clifford said...

Lots of fear in this...

Cryn Johannsen said...

I'll respond to both of you soon. I am working on a few other projects.

OGRE said...

He might be more amendable to restoring Bankruptcy protection to student loan borrowers. Doubtful he would fall for the framing of BK as some moral failure on the part of the borrower, and its pretty clear hes not on the side of the big banks. And I think the lack of a BK option in student loans has been a major driving force in the increase in student loans and tuition rates.

Cryn Johannsen said...

@Ogre - I am writing about that next. You are onto something, and I was thinking that myself.

Cryn Johannsen said...

Anon on Nov 13 @ 2:30 - Yes, Trump sold people snake oil via Trump University. BUT . . . those calling him out, Rubio, Romney, et. al . . . let's just say they have no room to talk. For starters, Rubio was a huge defender of the for-profits. Then Romney has close ties to folks who run for-profits (See David Halperin's work on this: http://www.huffingtonpost.com/davidhalperin/mitt-romney-for-profit-colleges_b_1324210.html). Moreover, Bill Clinton became an "honorary chancellor" or a for-profit, earning him over $17.6 million over the course of 5 years (see here: https://www.washingtonpost.com/politics/inside-bill-clintons-nearly-18-million-job-as-honorary-chancellor-of-a-for-profit-college/2016/09/05/8496db42-655b-11e6-be4e-23fc4d4d12b4_story.html).

So, Trump is a snake oil man, but there is a difference between his university and what I outlined above. These for-profits above not only rip off the students who attend with their faulty degrees BUT also the taxpayers. At least - and I hate to give Trump credit - Trump University wasn't also ripping off taxpayers.

Cryn Johannsen said...

Please excuse any typographical errors in my above comment - I wanted to get back to you, and am running out the door to work.

Cryn Johannsen said...

I'll write a piece about this later, too.

Anonymous said...

Cryn,

A family member posted on Facebook last night a story from Fox news, which is fear-mongering its viewers about the student loan income driven repayment plans and how, over the next several years, there will be quite a bit of forgiveness. She stated that she was furious about this because, "You borrow it, you pay it back, period." I love her. She is a wonderful human being, but she is so misguided in this regard. I left a comment only to delete it later because I was not interested in engaging in what could have become an argument.

I feel so sick to my stomach. It truly is the case that unless people are in this boat, they will never understand. Nobody will know what it's like to be me. I took out a modest loan 10 years ago and put it into repayment immediately so that I could be debt-free when I graduated. Several years later, I found out that I had $100,000 in private student loan debt. I believe that my ex-husband took this money out in my name or my bank committed fraud because I have no recollection of doing this. Over the last 10 years, I have made a total of $99,000 in payments to the bank. When I have paid more than the minimum payment, I have asked for the money to be applied to the principle and I am told that they will not do this. Ten years and $99,000 in payments later and my balance HAS NOT BUDGED.

I have spoken to several lawyers (paying good money to do so) and have been told that the only way to fight this is to file bankruptcy and then file and adversarial petition. Of course, doing that would cost me $10,000 and I am told that I would lose, anyway. One well-meaning lawyer attempted to contact the student loan company on my behalf. They kept him on hold for a great deal of time and then hung up on him. He called back immediately, and they hung up on him again. No lawyer wants to or can take this on. The reason is that the law cannot help you if your bully/captor is above it.

Now that Trump will be our president and our congress is full of republicans (who removed protections from SLs in the first place), I am terrified that they are going to take away the only way I have to feed my family. Since I have such high private loans, my husband and I have our federal loans on the income driven repayment plans. Take those away from us and we will literally lose everything... and we're middle-aged. It isn't like we can start over, especially when defaulted student loans follow you to your grave; they never go away.

No human being should be sentenced to several decades of indentured servitude/financial distress because of a decision they made as a teenager... the law typically protects minors who commit heinous crimes such as murder... but take out a student loan and you're thrown into a tank of hungry sharks. It isn't like the decision to go to school was wreckless, either. Parents, school counselors, teachers, principals - everyone in whom we placed our trust told us that our best chance of survival in this world was to arm ourselves with college degrees. Ironically, doing so is the one thing that has kept me and my husband perpetually unable to survive.

I am looking for peace. I am looking for reassurance. I need some positivity. Please tell me that there is hope. Please tell me that everything is going to be okay.

-B

Anonymous said...

http://abovethelaw.com/2016/11/recent-law-school-graduate-commits-suicide-after-failing-bar-exam/