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Here's What Might Happen to Your Student Loans in Trump's America

Believe it or not, there are reforms on the horizon that could help some debtors—but it's far from clear if student debt is a priority for Donald Trump or the incoming Republican Congress.
December 2, 2016, 5:00am

Lauren doesn't answer the phone if she doesn't recognize the number. The loan collectors call her at least twice a day, seeking payment for the $22,000 she took out to attend a public university in Florida. When they can't get a hold of her, they try her at the various dance studios where she teaches and gigs. Though she needs to get a master's to achieve her dream of working as an arts administrator, the thought of going into even more debt makes her sick to her stomach. Her mother, who served as guarantor for the loans, also gets these calls, and so does the 27-year-old's grandfather in Connecticut. So while Lauren's interest continues to pile up, she sticks to freelancing and ignoring her phone.

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"They didn't call on Thanksgiving," she told me, "which I thought was really nice."

But lately Lauren, who supported Bernie Sanders during the election, has been given a surprising glimmer of hope in President-elect Donald Trump. Back in October, he proposed an uncharacteristically specific plan for dealing with the debt crisis. He said that slew of repayment plans created under executive order by Barack Obama should be consolidated into one, which would cap payments at 12.5 percent of a borrower's income, and that loan balances should be erased after 15 years of on-time payments as opposed to 20.

That would help people who have massive amounts of debt like Lauren. Right now, the two main reasons that she ignores her debt is that she fails to see the point in even trying to pay back a gigantic amount on such a measly income, and that she can't navigate the slew of plans that currently exist to make her payments more affordable. And she isn't alone––the Wall Street Journal reported in April that more than 40 percent of borrowers aren't making any payments at all, which can result in the government garnishing their wages. What's more, the people who participate in the programs tend to be people with lots more debt than Lauren has––and typically much higher income––who are therefore less likely to need the help.

But a report released on Wednesday found the current repayment plans will end up costing the government at least $74 billion in erased debt, more than previously found. And the moderately progressive plan proposed by Trump will likely cost the government even more according to Andy Josuweit, who runs the site Student Loan Hero.

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"I don't expect this plan to pass with a conservative Congress, if Trump does decide to pursue the plan as he originally described it," he told me. "However, given that some of the other plans that Trump outlined in his campaign have already seen significant changes––the changes to his plans for the Affordable Care Act, for example––it's entirely possible that his student loan plan will change as well."

Trump's agenda isn't the only one that matters. It also makes sense to look at a handful of bills going through a Republican-controlled Congress, according to another expert named Sean Feeney. He's the vice mayor of a small town in Ohio who became fascinated with student debt after graduating college in 2005––right around the time Sallie Mae lobbied to strip bankruptcy protection from student loans.

"Realizing that it was a law that caused this issue caused me to get involved in politics," he told me. "If a law can cause it, a law can fix it."

Now he keeps a running list of such potential laws on his site Student Loan Tracker. And although only 37 of the 2,076 student loan bills proposed in the past year have passed, Feeney says that student debt is something that the GOP is newly eager to tackle, possibly because they've realized that broke young people can't do things like buy houses.

"I'm a Democrat, and no fan of Trump's election, and the Republican track record on education is atrocious, so I can see why some are not optimistic about alleviating the student loan crisis over the next four years," he told me. "But student loans are one of the rare nonpartisan issues out there, and there is pending legislation to address it in a manner that Republicans can understand, which is tax breaks."

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Feeney's referring to HR 1713, which amends the IRS code to give tax breaks to employers who make minimum $50 a month payments toward their employees' student debt, and was referred to the House Committee on Ways and Means last year.

He's also eager to see what happens with a bill that would restore the ability for people to discharge their loans when they file for bankruptcy. He claims it's more likely to pass now than ever, given that Trump himself has benefited from filing for bankruptcy multiple times and that the man just appointed to commerce secretary, Wilbert Ross, is referred to as the "king of bankruptcy."

All of these possibilities could help Lauren. Under Trump's proposed plan, her federal loan payment would likely go down from $250 to something she considers more manageable. The average debt balance of people in income-based repayment plans right now is around $67,000, which also means she has relatively little debt compared to her peers. People with small-ish amounts of debt would benefit the most from having an employer that makes payments toward their debt, because theoretically their employers could be giving them the entire monthly payment rather than just part of a larger payment.

But while all of this sounds pretty good, Feeney suggested that people not get too excited. A lot can change in the amount of time it takes to achieve debt forgiveness, no matter who is in the White House.

"There are gonna be a whole circus of politicians who will come and go in that amount of time," he said. "The number of variables we're dealing with in 15 or 20 years, it's unrealistic to speculate whether we'll come out ahead or not."

Follow Allie Conti on Twitter.