TRUMP ADMINISTRATION SUSPENDS SOME STUDENT LOAN REPAYMENT PLANS
By G. A. McNeeley
April 1, 2025 (Washington D.C.) — Some student loan borrowers are seeing their payment plans get suspended, which means their payments are rising. This has to do with changes at the Education Department implemented by President Donald Trump’s Administration.
Approximately 43 million Americans have some kind of student loan debt, according to Newsweek.
The Education Department reported that Americans collectively have $1.5 trillion in student debt nationwide.
Trump has made efforts to dismantle the Education Department, and said that student loan programs could be moved to different agencies if the department is eliminated. Nearly half of all Education Department workers are being laid off, as the agency undergoes major restructuring.
What’s Happening To Student Loan Programs?
The Trump Administration got rid of online and paper applications for income-driven repayment plans from the federal aid website, Newsweek reports..This change occurred as the Eighth Circuit Court of Appeals blocked income-driven repayment plans in February. This means former President Joe Biden's “Saving on A Valuable Education” (SAVE) plan, and the Public Service Loan Forgiveness (PSLF) options aren’t available.
Now that these income-driven repayment plans are being suspended, borrowers can’t qualify for potential forgiveness or lower monthly payments based on their income or family size. Also, any payments that borrowers make no longer count towards the 120 qualifying payments they need to get to student loan forgiveness under the PSLF.
Many borrowers will also see monthly payments increase, because of these changes, according to Newsweek.
SAVE allowed 8 million borrowers to work toward student loan forgiveness, and allowed them to ignore their student loans for months. However, forbearance is scheduled to end this year, with the first payments arriving in December.
PSLF allowed public service employees to have their student loan balances cleared after 10 years of minimum payments.
"The PSLF Program has misdirected tax dollars into activist organizations that not only fail to serve the public interest, but actually harm our national security and American values, sometimes through criminal means," Trump's order says. "The PSLF Program also creates perverse incentives that can increase the cost of tuition, can load students in low-need majors with unsustainable debt, and may push students into organizations that hide under the umbrella of a non-profit designation and degrade our national interest, thus requiring additional Federal funding to correct the negative societal effects caused by these organizations' federally subsidized wrongdoing."
Based on Trump's executive orders and the federal court’s actions, it's unclear whether millions of borrowers will qualify for student loan forgiveness anymore. The future of SAVE and PSLF are both in jeopardy.
Education Department Staff Are Being Laid Off
Adding to the uncertainty are layoffs at the Education Department, which oversees the federal loan system, according to AP.
An hours-long outage on Wednesday, March 12, affected the federal website for student loans and financial aid (StudentAid.gov(link is external)), underscoring the risks in rapidly gutting the Education Department, according to ABC News.
The National Association of Student Financial Aid Administrators (NASFAA), who handle colleges’ financial aid awards, received reports of users experiencing technical issues and having trouble completing the Free Application for Federal Student Aid (FAFSA).
The developers and IT support staff who worked on the FAFSA form were affected by the Education Department’s layoffs, along with the termination of probationary employees. The Education Department has reduced its staff by half, to about 2,000, since Trump took office.
A list of laid-off staff obtained and verified by AP News shows that over 300 people were cut from Federal Student Aid (two dozen of them worked in their technology division). The list included the entire team responsible for systems supporting the FAFSA form.
While laid-off staffers were technically employed until Friday, March 21, they had limited access to their email, phones and computers, making a response to the outage difficult, according to ABC News.
What Can Student Loan Borrowers Still Do?
All borrowers currently enrolled in income-driven repayment plans should “get a sense of when your recertification deadline is, and get a sense of what options are available to you if the form is not available online to recertify your income,” Aissa Canchola Bañez (policy director at the Student Borrower Protection Center) told AP News.
Bañez told The Hill that borrowers need to download their payment history from the Federal Student Aid portal, screenshot tracking information if they’re on a plan that allows for forgiveness, and reach out to Congress members to help with their case.
“Members of Congress have entire teams that are dedicated to accessing casework on behalf of constituents that are having challenges with the federal agency, and these loans are directly from the Department of Education, and so borrowers should reach out for help from the members of Congress, regardless of their party, and demand that their members start working on their behalf, especially if they’re not able to get answers from the department,” Bañez told The Hill.
“Try saying something like, ‘I need your help to understand how to get into an affordable repayment option, which I’m entitled to under the law,’” Bañez told AP News. “‘Even though this federal department has taken down these applications, I need your help.’”
What Are The Experts Saying?
Kevin Thompson (a finance expert and the founder and CEO of 9i Capital Group) told Newsweek, "The Biden-era SAVE repayment plan has been blocked, and as a result, some borrowers are now seeing their loan payments quadruple (no longer being based on income).”
"Borrowers should expect higher payments moving forward, which could lead to a surge in defaults and credit score hits. If the Trump Administration takes a harder stance on student loan relief, things may become even more challenging for those struggling to repay,” Thompson added.
Michael Ryan (a finance expert and the founder of MichaelRyanMoney.com) told Newsweek, "Many payments now don't even cover accruing interest, creating negative amortization where loan balances grow despite regular payments. A particularly troubling aspect is that high-balance borrowers with moderate incomes could end up in perpetual debt if forgiveness timelines are eliminated as proposed in the College Cost Reduction Act."
Ryan added that borrowers should expect significant default increases in May, as millions of borrowers see payments going up by an average of $200 a month.
The SBA Will Now Handle Student Loans
Trump signed an executive order to move student loans to the Small Business Administration (SBA) on the same day that agency announced it was cutting 40 percent of its workforce, according to The Hill.
While advocates have been displeased with the student loan system for a long time, they worry more problems would be created than solved, by giving the biggest program the Education Department controls to an agency that’s seeing a sweeping reduction in force.
Moving student loans to the SBA, which “has no background of familiarity with the student loan program, with the rights afforded to student loan borrowers under the Higher Education Act (it will only make things worse for borrowers),” Bañez told The Hill.
Experts are advising borrowers to reach out to their loan officers and carefully document their repayment efforts, according to The Hill.
The president has offered no follow-up details on logistics for student loan borrowers, but the move was cheered by the Department of Education and the SBA.
“Whether it’s a loan for a business or a business degree, SBA is prepared to restore efficiency and accountability to our taxpayer-funded loan programs,” Kelly Loeffler (head of the SBA) said in a post on X (formerly Twitter). She also confirmed administration plan to cut about 2,700 positions out of its workforce of nearly 6,500.
Borrowers are in a precarious situation, with millions caught in limbo as The Trump Administration seeks to take away student loan forgiveness programs that were established and expanded by former President Biden.
Currently, advocates say they have little hope to offer the 45 million individuals with federal student loans, according to The Hill.
Sources: