Combined IBR and Subsidized Stafford Loan Proposal

Combined IBR and Subsidized Stafford Loan Proposal

Under the current IBR program, the borrower makes payments for 20 years, and in years 16 through 20 his income-based payments average $200 a month. Under the Trump proposal, the borrower doesn’t make those payments because the debt was already forgiven. Now compare that to the low-income borrower in the first example. Under the current IBR program, the borrower makes payments of just http://guaranteedinstallmentloans.com/payday-loans-ok $77 per month during years 16 through 20. Savings under the Trump proposal are therefore $77 a month for five years for that borrower due to the earlier loan forgiveness, substantially less than the borrower with more debt and a higher income who saves $200 a month for five years.

Next we combine the effects of Trump’s proposal to eliminate Subsidized Stafford loans with the changes to IBR. We have already described how a borrower who fully repays his loans (i.e., does not qualify for loan forgiveness under IBR) pays more in total due to the loss of Subsidized Stafford loans because the borrower leaves school with a larger loan balance that now includes accrued interest from the time spent in school. However, if the same borrower receives loan forgiveness under the Trump proposal, that additional debt is forgiven anyway. The Trump proposal delivers larger benefits even with the loss of Subsidized Stafford loans for borrowers who use IBR and qualify for loan forgiveness. (more…)

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