Many student loan borrowers relying on debt forgiveness are becoming increasingly worried about potential revisions to existing repayment programs under the Trump administration. These concerns stem from fears about the future of their financial obligations and the potential changes that might affect their ability to secure relief from their educational debts.
Borrowers who were hopeful about seeing their student loans wiped out recognized that they were losing a key supporter when former President Joe Biden — whose administration previously erased billions in student debt — exited office. However, they still have access to established avenues for debt cancellation, which is a silver lining amidst the uncertainty.
It’s important to clarify that borrowers retain access to existing pathways, particularly income-driven repayment plans and the Public Service Loan Forgiveness program, also known as PSLF. Yet, the recent actions taken by the administration have put many borrowers on high alert regarding their financial futures.
Millions of borrowers are currently in limbo as they await clarity on whether the Saving for a Valuable Education, or SAVE, plan will remain intact. They are also anxious about what their payment and forgiveness options will look like if it is indeed discontinued. Borrowers employed in non-profit jobs are particularly concerned about the future of PSLF following an executive order that seems to limit the types of jobs that qualify. Additionally, staffing cuts at the Education Department, which oversees modifications to student loan repayment, were enacted earlier this year, a move currently challenged in court.
Amid such significant uncertainty regarding repayment options, what actions should borrowers take? “Avoid making any hasty decisions based on sensational headlines,” advises Betsy Mayotte, president of The Institute for Student Loan Advisors. “This is my top recommendation.”
She emphasizes that any significant changes will require substantial time to implement, allowing borrowers ample opportunity to thoughtfully evaluate their available options.
This is particularly relevant because both Public Service Loan Forgiveness and income-driven repayment plans are legally established through statute. While experts in student loans and consumer advocates anticipate potential changes in the future, it’s critical to remember that terminating either program would necessitate congressional approval and a lengthy regulatory process for any significant alterations.
Here’s what borrowers need to understand about their current options for loan forgiveness and the possible changes on the horizon.
Understanding Future Impacts on Income-Driven Repayment Plans
Approximately 8 million borrowers currently enrolled in the SAVE plan have been in a state of forbearance since last summer, due to a court injunction halting the full implementation of the Biden administration’s flagship repayment initiative.
To provide some context, all present income-driven repayment plans calculate monthly payments based on an individual’s earnings and family size, offering loan forgiveness after a specified number of qualifying payments, usually spanning 20 to 25 years. However, the SAVE plan was notably more favorable than prior models, as it promised reduced monthly payments and expedited forgiveness for borrowers with lower balances.
Despite the ongoing court case that paused the SAVE plan, most experts concur that borrowers should not anticipate its continuation.
“The SAVE plan is unlikely to survive. The question remains who will be responsible for declaring its end, whether it be the courts or Congress,” Mayotte asserts.
Once the SAVE plan is officially terminated, millions of borrowers currently in this program will transition to a different repayment plan. The specifics of this new plan, whether it is a legislative creation or an updated version of an existing plan introduced through regulatory changes, remain uncertain.
Republican lawmakers in the House of Representatives are advocating for a significant overhaul of the repayment system, claiming it will incentivize borrowers to repay their loans while ultimately reducing taxpayer costs. Their proposal suggests a singular income-driven option that establishes monthly payments based on a borrower’s adjusted gross income.
Compared to the SAVE plan, the majority of borrowers may face higher monthly payments under the current House Republican model. Nevertheless, in comparison to some older income-driven models, certain borrowers might experience similar or even lower payments. This plan also proposes extending the forgiveness timeline, stipulating that borrowers must make payments for 30 years before any remaining balance is forgiven. House Republicans have included this repayment overhaul in their grand budget bill, which could undergo significant revisions during Senate discussions. Lawmakers are aiming for a finalized bill by July.
Simultaneously, the Education Department is prioritizing two specific existing plans — Income-Contingent Repayment and Pay as You Earn — for regulatory adjustments via a process called negotiated rulemaking, though no concrete details about potential changes have been disclosed. Any alterations resulting from these negotiation sessions are unlikely to be implemented until at least the following summer.
The takeaway is that numerous variables could influence the availability of income-driven plans and their respective forgiveness options for both current and prospective borrowers. However, immediate changes are not anticipated, and the existence of some form of income-driven plan featuring a forgiveness timeline seems secure.
Action Steps for Borrowers on Income-Driven Repayment Plans
Last month, loan servicers resumed processing applications for income-driven repayment plans after a nearly three-month hiatus. Currently, a backlog of around 2 million applications exists, as per data from the Education Department. The resumption of application processing signifies that those struggling with their bills should soon be able to enroll in a more manageable plan.
Utilizing the loan simulator available at studentaid.gov can help you understand what your payments would look like under various repayment plans. It’s important to remember that income-driven plans are not the sole option for those who are finding it difficult to meet their monthly obligations: For short-term financial challenges, borrowers can request either a forbearance or a deferment. Additionally, they may wish to explore whether another payment plan, like the extended option, could sufficiently lower their monthly payments to a more manageable level.
Borrowers currently participating in income-driven plans — especially those nearing the necessary payment count for forgiveness — should be aware that the government has halted forgiveness processing under three specific IDR plans, namely SAVE, Pay as You Earn, and Income-Contingent Repayment. However, forgiveness under Income-Based Repayment (IBR) remains operational, and payments made on the other plans will still count towards forgiveness provided you enroll in IBR.
Regardless of the repayment plan you are on, it is advisable to monitor your repayment progress closely. Keeping accurate records of your current plan, payment amounts, and your remaining timeline to forgiveness is particularly wise during these times of anticipated changes in repayment strategies.
At this moment, there is little that borrowers can do except remain informed and proactive about their options as they await clarity on future developments.
Public Service Loan Forgiveness Program Remains Secure for the Time Being
Despite the executive order issued by Trump in March aimed at restricting eligibility for the Public Service Loan Forgiveness program, the initiative remains unaffected, and the qualifying job criteria are unchanged.
PSLF, which grants student loan forgiveness to individuals employed in government and non-profit roles who have made ten years’ worth of payments, is clearly delineated in legal statutes. All 501(c)(3) organizations qualify as eligible employers. Therefore, despite Trump’s expressed desire to limit eligibility for certain organizations, and the Education Department’s focus on PSLF as an area for potential regulatory changes, the legal framework provides limited flexibility. The only proposed change in Congress is to stop counting periods of medical residency as qualifying employment for forgiveness.
Connor Pierce, a certified student loan professional with Student Loan Planner, advises borrowers currently on the ten-year path to PSLF to refrain from making any sudden decisions based on the current administration’s actions.
“If you had a viable plan before, it’s prudent to maintain that course until the situation stabilizes,” he suggests.
However, he also points out that there are ways the Trump administration could complicate access to PSLF and income-driven plans without necessitating legal or regulatory changes. Reductions in staffing could lead to delays in various services, such as processing applications for repayment plans and approving employment verification forms for PSLF.
Practical Steps for Borrowers Working Toward PSLF
Borrowers currently enrolled in the SAVE plan should be aware that their months spent in forced forbearance do not contribute towards the 120 payments required for Public Service Loan Forgiveness. If you are able to make payments now, it would be wise to consider switching to a different income-driven plan. While this means resuming monthly payments, it allows you to actively progress towards forgiveness instead of remaining in a state of uncertainty.
Consumer advocates strongly recommend that borrowers download their payment history to maintain an updated record of their status in the PSLF timeline. Similar to the income-driven plans, borrowers should prepare to advocate for themselves as they navigate the system and persistently follow up with loan servicers when needed.
Additional Resources and Insights from Money:
Trump Administration Resumes Student Debt Collections for Millions of Borrowers in Default
Student Loans Will Get (Slightly) Cheaper Next Year Thanks to Lower Interest Rates
9 Million Student Loan Borrowers Will Soon Face a ‘Significant’ Credit Score Impact
