Official newspaper of The University of Texas at Austin

The Daily Texan

Official newspaper of The University of Texas at Austin

The Daily Texan

Official newspaper of The University of Texas at Austin

The Daily Texan

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October 4, 2022
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Trump presidency may reverse Obama policy, affect student loans

2016-08-24_DonaldTrump_Joshua
Joshua Guerra

President-elect Donald Trump’s plans for higher education policy will reverse legislation already in place if implemented.  

In 2010, President Barack Obama moved to allow the federal government to issue loans, rather than having banks and private financial institutions play the middleman in facilitating the process.

 Trump has said he will reverse Obama’s legislation and put banks back into the system. In May, Sam Clovis, a policy advisor for Trump’s campaign, told Inside Higher Ed that loans should be distributed locally by banks, rather than through the federal government.


“We think it should be marketplace and market driven,” Clovis said to Inside Higher Ed. 

This process will be costly for either students or the federal government, said Craig Lindwarm, director of congressional and governmental affairs at the Association of Public and Land-grant Universities.

 “If that’s the decision that’s made, then there are going to be consequences, [and] Congress is going to have to find a way of paying for it,” Lindwarm said. “Students are going to pay potentially increased interest rates.”

 The Congressional Budget Office estimated the move in 2010 saved the government close to $60 billion over 10 years and much of that funding went to the Pell Grant program, which directly benefits students, Lindwarm said. If Congress reverses Obama’s legislation, Lindwarm said APLU does not want the students to pay for it.

 “Direct loans are much more efficient, and keeping [it] makes a lot more sense,” Lindwarm said.

 According to UT’s Office of Financial Aid, private student loans are generally more expensive and may not offer the benefits that come with federal student loans. 

These benefits include fixed interest rates for monthly payments and income-driven repayment plans, student loan repayment plans where students pay based on a certain percentage per month and debt forgiveness after a certain number of years.

Currently the caps for these plans range from 10–15 percent of income and debt forgiveness after 20–25 years, according the Federal Student Aid website. Trump said at a rally on Oct. 13 that he wants to change the caps to 12.5 percent payments a month and loan forgiveness after 15 years. 

Richard Murphy, UT economics assistant professor, said in an interview with The Daily Texan last month that changing the caps will only have a small impact on the economy.

“The way [IDRs] are set up today means there are still many hurdles and making minor adjustments to the terms will make little meaningful difference to the life of graduates,” Murphy said.

Murphy said few students use these plans because of the complicated application process.

Clovis also told Inside Higher Ed in May that they were considering keeping colleges accountable if students default on their loans by restricting access to federal funding if too many students default.

“If you are going to study 16th-century French art, more power to you. I support the arts,” Clovis said to Inside Higher Ed. “But you are not going to get a job. If you choose to major in the liberal arts, there are issues associated with that.”

Clovis said if colleges allow this practice to continue, colleges will be punished.

Lindwarm said this policy, known commonly as risk sharing, may have unintended consequences.

“Some of those consequences could create incentives for institutions to favor in admissions the students to least likely default on student loans. The last [thing] we should be doing is closing doors,” Lindwarm said.

Richard Reddick, UT educational administration professor, had similar concerns with the effects of risk sharing on underrepresented students.

“First generation and low income students, students of color, and other underrepresented student populations could be scrutinized in such a way that their already limited pathways to college could be compromised [from risk sharing],” Reddick said in an email. “The best thing for everyone would be for the president elect to rapidly formulate a plan, so policy makers and researchers could actually respond to a strategy, rather than this scattershot assemblage of campaign promises.”

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Trump presidency may reverse Obama policy, affect student loans