With most of President Joe Biden’s student loan program stalled in court, the upcoming Trump administration may have a huge influence on millions of debtors.
President-elect Donald Trump has not made any particular pledges on student loans or other types of college financial aid, but providing student loan forgiveness is not a policy priority for him, as it was for Biden.
Republicans have repeatedly criticized Biden’s efforts, and when his broad student loan forgiveness program was overturned by the Supreme Court last year, Trump said the proposal “would have been very unfair to the millions and millions of people who have paid their debt through hard work and diligence.”
During his first term, Trump advocated abolishing a program that forgives student loans for public sector employees after ten years, and his administration attempted to limit debt relief for borrowers who were deceived by their universities. Both approaches failed, but the last kept many individuals waiting for years to find out whether their debt-relief application would be approved.
The Trump administration may be able to unilaterally make some changes to the federal student loan system through a regulation procedure, but other acts, like as dissolving the Department of Education, would require congressional authorization.
Here’s what student loan borrowers should know about what’s at risk and what Trump might do:
Biden’s SAVE repayment scheme
One of the first issues Trump’s Department of Education may face is what to do with Biden’s SAVE (Saving on a Valuable Education) repayment scheme, which is now on hold due to litigation.
There are 8 million people enrolled in SAVE, and if it is overturned in court, they will have to transition to a different repayment plan.
A lawsuit filed by six Republican-led states claims that the president lacks the authority to enact the plan. A decision from the 8th US Circuit Court of Appeals is likely soon.
The Trump administration might opt to cancel the repayment plan, which was established through a regulatory process. It may also opt to quit defending the proposal in court.
SAVE, which was established last year, is intended to provide the most lenient terms to low-income borrowers. Under the concept, some enrolled borrowers’ monthly payments might be as low as 5% of their discretionary income. It also offers to eliminate outstanding student loan debt after as few as ten years of payments.
Borrowers enrolled in SAVE are not now obligated to make payments since the Department of Education has placed them on an interest-free forbearance owing to the litigation. The agency is set to reopen two older income-driven repayment programs in December, offering debtors the option of switching to a plan that may be less expensive than the normal 10-year plan.
Income-driven repayment plans base a borrower’s monthly payment on their income and family size, not the amount of debt owed. In addition to lowering monthly payments, the plans guarantee to pay off leftover student debt when a borrower makes a specific number of payments – often 20 or 25 years.
The Heritage Foundation’s conservative blueprint, Project 2025, argues for the creation of a single new income-driven repayment scheme while eliminating all others. The policy paper also advocates for the elimination of any loan forgiveness provisions in the repayment plan, however this would most likely necessitate a congressional act.
Trump has distanced himself from the 900-page playbook, but an AWN analysis revealed that at least 140 officials from the first Trump administration were involved.
Biden’s $175 billion for student loan relief
The Biden administration has canceled a record $175 billion in student loan debt for roughly 5 million people, primarily through existing relief programs for public sector employees, disabled borrowers, and students who were deceived by their colleges.
Under Biden, the Department of Education temporarily increased eligibility for the Public Service Loan Forgiveness program, recounted previous payments to correct administrative errors, reduced red tape for disabled borrowers, and worked through a backlog of relief applications left over from the previous Trump administration.
Trump has not stated that rescinding previously awarded student loan forgiveness is on his agenda for his second term. It may be tough both politically and logistically.
Attempts to overturn student debt relief are likely to face judicial hurdles.
“If the new Trump administration attempts to reinstate discharged loans by reversing legal positions, they will be held accountable and spend much of the next four years tied up in court,” said Aaron Ament, president of the charity National Student Legal Defense Network.
Some borrowers may have received notification from the Department of Education that they have been awarded debt relief, but they have yet to see any changes to their account balance. Even in that case, there is precedent that the forgiveness would still be effective under a new administration.
“We do not believe that can be clawed back under the law. We don’t believe it should be clawed back, but we’re prepared to fight those releases,” said Eileen Connor, president and director of the Project on Predatory Student Lending, which represents borrowers duped by their institutions.
Biden has made additional efforts to develop new programs that provide student loan forgiveness, but none of them are currently in place. His signature student loan forgiveness scheme, which would have provided millions of borrowers up to $20,000 in relief, was overturned by the Supreme Court last year.
Since then, his Education Department has been seeking to introduce more targeted debt-relief initiatives through regulatory channels. But those recommendations have not been completed, and Trump’s new administration may opt not to implement them. One idea, which would waive interest payments for some student loan borrowers, is already being challenged in court by Republicans.
Trump’s previous acts regarding student loans
During Trump’s first term, he unsuccessfully attempted to make it more difficult for some people to qualify for student loan forgiveness under two existing programs. His Education Secretary Betsy DeVos and many other Republicans opposed any debt relief because it shifts the burden to taxpayers, many of whom did not attend college.
The Public Service Loan Forgiveness program (PSLF) was established during President George W. Bush’s administration in 2007. It cancels any leftover student loan debt after a qualifying public sector worker makes ten years of payments.
During his first administration, Trump advocated for the elimination of PSLF. However, because the program was founded by Congress, it would have to be terminated by Congress, a step that has already received opposition.
Trump’s proposal would have ended the program for new borrowers alone.
Borrower defense to repayment: Trump’s first administration attempted to reduce the borrower defense to repayment program, which provides debt relief to students who were deceived by their colleges.
DeVos attempted to modify the regulation so that eligible borrowers would receive partial relief rather than total debt cancellation. She made it clear that she thought the rule was “bad policy” because it put taxpayers on the line for the expense of debt relief without the necessary safeguards in place, and she made amendments to limit its scope.
The proposal was failed, but the government halted processing borrower defense claims while defending legal challenges. As a result, a backlog of over 200,000 claims accumulated. DeVos and the department were eventually held in contempt of court for continuing to collect on some of the loans while the regulation was being considered.
The Biden administration has sought to reduce that backlog.
Call to eliminate the Department of Education.
Trump has proposed dismantling the Department of Education, which now manages the $1.6 trillion federal student loan portfolio.
First and foremost, Trump will need Congress to abolish the department, and it is unclear if he will have the legislative backing to do so. Trump’s first administration considered merging the Education and Labor departments, but the concept was rejected despite Republicans controlling both the House and the Senate at the time.
It is possible that some activities and funds will be kept and transferred to other agencies, as they did before the department was established in 1979.
If this occurs, Project 2025 advises transferring the federal student loan portfolio to the Department of Treasury.