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The Key Takeaways
- Student loan borrowers are once again in limbo as they wait to see how Donald Trump's administration will change policies.
- The outlook has worsened for President Joe Biden's signature student loan reform, the SAVE repayment plan.
- The Trump administration is likely to reduce the likelihood of student loan forgiveness, because Republicans generally oppose it.
In the coming year, the lives of 43 million Americans who have federal student loan debt will be more uncertain.
There is one thing that will happen on January 20: the White House, which has long pushed for forgiveness of student loans, will pass from Joe Biden’s hands to Donald Trump. Trump had heavily criticized Biden’s policies. Under the Trump Administration, it is likely that the Department of Education won’t be as willing to forgive student debt.
What are the changes for students loan borrowers that we can expect in 2025?
The fate of Biden’s student loan reform could be resolved
After Republican states filed a lawsuit to stop it, the courts temporarily halted a major overhaul of student loans by President Joe Biden’s administration. A judge stopped the Department from implementing its new Saving for a Valuable Education repayment plan (SAVE). The income-based repayment plan provides generous terms for repayment and will forgive any balance for those who pay for up to 25 years.
The court’s ruling blocked the forgiveness of loans under PAYE, ICR and other income-driven plans. SAVE rendered these two programs redundant, but enrollment was reopened in December following the court challenges that frozen the SAVE program.
The 8 million SAVE members have their loans in administrative forbearance since the court rulings. This means they are not liable to pay and will not accrue interest.
The case might reach the Supreme Court by 2025. Experts in student loans speculate, however, that Trump’s administration may simply decide to stop defending the lawsuit, resulting in its loss.
There could be even bigger changes in store
Republicans have the chance to change student loan payment rules according to their own preferences because they won control of Congress during November’s elections. Republicans have tried to repeal the Public Service Loan Forgiveness Program in the past.
Trump proposes eliminating the Department of Education that oversees the Student Loan System. This change will require cooperation from lawmakers and may be blocked by Democrats with enough Senate seats to block legislation. Trump didn’t specify who would be in charge of student loans after the Department was gone or if existing programs for student aid would continue.
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