Credible prepares for Donald Trump's student debt shakeup

Trump wants to make student debt harder to escape

Credible offers exposure to doctors and lawyers student debts. But what will Trump do?

American upper-middle class professionals can pay off their student loans faster than most plans allow and save thousands of dollars by doing so. 

A new study by Credible, the student debt fintech, has found that while doctors and lawyers may be heavily burdened with student debt, their high salaries mean they can pay them off in under a decade. 

“Although they owe considerably more… most high balance borrowers refinancing student loan debt of $100,000 or more will pay off their loans in 10 years or less,” the study concluded.

“Refinancing into loans with shorter repayment terms allows these borrowers [to] obtain loans at lower rates and maximise their overall savings.”

The average borrower using Credible to refinance a graduate loan was a 32-year-old married man earning US$120,000. For this average person, the 20-year time frame set out by most student debt schedules was too long and meant thousands of extra dollars went out the door in interest repayments. 

The advantage Credible’s platform offers for this high class of earner is less debt overall and being debt-free a decade earlier. For Credible’s investors, upper-middle class professionals' debts are a reliable and sometimes even “super prime” credit product. 

The report painted a particularly rosy picture of doctors’ debts, noting that the average doctor’s annual salary is greater than the debts accumulated obtaining a medical degree. 

“Doctors were the only group that had average annual income that exceeded the average debt balance refinanced,” it said.

While optimistic about student debt, the report warned of coming political headwinds.

Donald Trump’s 2018 budget proposes to end debt forgiveness for public servants and charity workers and attach higher interest rates to all student loans - with far-reaching consequences for student debt markets.

Whether Trump’s proposals go ahead remains to be seen. In Washington - unlike in Westminster systems of government such as Australia and the UK - the president’s budget is only a proposal: it ultimately falls to Congress to write and enact laws.