LISTEN UP: IF YOU'RE ON THE HOOK FOR STUDENT LOAN DEBT, PROJECT2025 PLANS TO TURN UP THE HEAT!

As part of its overarching purpose to “take down the deep state and return the government to the people,” Project2025 (P2025) has set its sights on drastically revamping federal educational policy. One of its end goals—and something that has long been dear to the heart of arch conservatives— is to wipe out the Department of Education: “Federal education policy should be limited and, ultimately, the federal Department of Education should be eliminated (p.319).”

While the complete dismantling is one of the long range goals of the Department of Education, a more immediate dream of P2025 is the blocking of any effort to forgive student loan debt and, in line with this, to decimate all current Income Driven Repayment (IDR) plans and replace it with something that’s much more onerous.

Existing IDR plans are far from perfect and, in my judgement, their problematic nature underscores why we need a debt Jubilee when it comes to student loans.

But I’m a realist, and I know that a complete abolition of student loan debt ain’t happening no time soon. As such, while fighting for abolition of student loan debt, we need to collect any victories we can along the way and, most importantly, we need to fight against any proposals that’ll increase financial fragility of those already struggling to come with that monthly student loan payment.

If P2025’s proposal comes to fruition, and you’re enrolled in one of the existing IDR plans, there’s a pretty good bet that your monthly student loan payment is getting ready to jump, and jump by a lot.

EXISTING INCOME DRIVEN REPAYMENT PLANS: THE QUICK AND THE DIRTY

Unless your “peeps got pockets”—and pretty deep ones— you’re probably going to have to borrow some coins to finance your educational journey. The reason is simple: The cost of furthering your education is getting increasingly expensive.

Between 1980-81 and 2021-22, the inflation adjusted cost of attending a four year college took off like a rocket, soaring from $11,840 to $30,031 per year. That’s a whopping increase of 154%.

Unsurprisingly, you’ll have to repay any student loan debt you assume and, if you have a federal loan provided through the Department of Education, you’ll have the option of enrolling in a standard or income driven repayment (IDR) plan [click here for a detailed description of the standard payment plan and here for a lucid discussion of IDRs].

Under an IDR, your monthly payment on your student loan depends on your income and the size of your household. More specifically, the typical IDR demands that the borrower pay somewhere between 10%-20% of discretionary income, with the exact percentage being determined by which plan the borrower enrolls in.

Oh, yeah, “discretionary income” is defined as the difference between one’s adjusted gross income—as reported on federal tax returns— and 150% of the federally defined poverty level, adjusted for family size [click here for a detailed display of the federal poverty level, adjusted for family size]. If your adjusted gross income is less than 150% of the poverty level, you’re generally exempt from making monthly payments and, whether or not you have to make payments, any remaining balances after 20-25 years are forgiven.

At this point, your eyes might be glazed over. This part is not exactly exciting.

I get it.

But I also get this: A simple example always helps to get some of that glaze off the eyes. Let’s assume that you’re rocking solo— that is, you’re a one person household— and that your adjusted gross income is $45,000 per year, and you’re enrolled in an IDR plan that requires you cough up 10% of your “discretionary income.”

So, here’s the question: How much is your monthly loan payment?

Well, remember that typical IDR plan pegs your monthly payment as 10% of the difference between your adjusted gross income— which is $45,000 in this hypothetical scenario— and 150% of the poverty level— which is $22,590 for a one person household ($15,060X1.50).

The difference, then between your AGI and 150% of the poverty threshold for a single person household is $22,410 ($45,000-$22,590). Take 10% of that bad boy and divide it by twelve and presto: Your monthly payment checks in at $186.75.

LOWERING THE THRESHOLD, RAISING THE PAYMENT

When it comes to educational policy and the financing of college attendance, one of the primary goals of P2025 is to a) drive the Department of Education out of existence and b) ensure that student debt forgiveness becomes—and remains— an impossibility. Lest there be any doubt about this, just read Chapter 11 of P2025’s Mandate For Leadership: The Conservative Promise. The author of that chapter, Lindsey Burke, Director of the Center For Educational Policy at the Heritage Foundation, pens the following words:

LOWERING THE THRESHOLD, RAISING THE PAYMENT

When it comes to educational policy and the financing of college attendance, one of the primary goals of P2025 is to a) drive the Department of Education out of existence and b) ensure that student debt forgiveness becomes—and remains— an impossibility. Lest there be any doubt about this, just read Chapter 11 of P2025’s Mandate For Leadership: The Conservative Promise. The author of that chapter, Lindsey Burke, Director of the Center For Educational Policy at the Heritage Foundation, pens the following words:

If new legislation is possible, there should be no loan forgiveness, but if not, existing law would require forgiving remaining balance after 25 years.

Dr. Burke clearly knows that permanently barring loan forgiveness is a heavy lift; therefore, she reluctantly accepts what most IDR plans currently permit, namely, the discharge of any student loan debt that remains on the borrower’s books after making payments for 20-25 years.

But, and particularly germane to this blog, she argues in favor of drastically reducing the income exemption level— that is, the threshold beneath which no payment need to be made.

In other words, P2025 would phase out existing IDR plans and replace it with something “new”:

The Secretary should phase out all existing IDR plans by making new loans (including consolidation loans) ineligible and should implement a new IDR plan. The new plan should have an income exemption equal to the poverty line and require payments of 10 percent of income above the exemption.

An income exemption equal to the poverty line? What does that mean? The best way of illustrating the meaning and import of that particular line is to take a quick minute and return to our previous example wherein you were asked to imagine yourself as living in a single person household, earning $45,000 per year, and paying 10% of your “discretionary” income toward your student loan debt. In that example, if you remember, your discretionary income was $22,410 and 10% of that worked out to be $186.75 per month.

What P2025 is proposing, then, is that configurations like these are phased out and replaced by one where the income exemption level is pegged at the official poverty threshold ($15,064), not 150% of that threshold (1.50*15,060).

What this means, then, is that your discretionary income is no longer $22,410 but now climbs to $29,940 ($45,000-$15,060). Your monthly payment—10% of “discretionary” income— zooms from $186.75 to $249.50, a jump of 34%!

WRAPPING UP

The long and short of it, then, is this: When it comes to education, P2025 is about, among other things, abolishing the Department of Education, shutting down student debt forgiveness, phasing out existing IDR plans and replacing these plans with a new one that’ll result in substantially higher monthly payments.

Existing IDR plans are far from perfect, and I’ll comment more extensively on them in a subsequent post. For the moment, though, it’s important to note that P2025 is likely to increase the financial fragility of millions of student loan borrowers, with low income borrowers really feeling the pinch.