The federal student loan system is currently experiencing significant turmoil. Beth Akers, a researcher on higher education at the conservative American Enterprise Institute (AEI), describes the situation as "unprecedented uncertainty," while Michele Zampini from the left-leaning Institute for College Access and Success refers to it as "total disarray."
This turmoil primarily involves 8 million federal student loan borrowers awaiting a court decision on the legality of their repayment plan, while another 9 million borrowers are behind on payments and could potentially default. Furthermore, the federal office managing student loans has been halved in size, and there is the possibility of relocating to another federal agency.
NPR has engaged with student loan experts and the Trump administration in recent weeks to address some of the most pressing questions from borrowers. Here are six key findings from this investigation:
9 Million Borrowers Risk Default: During the pandemic, federal student loan payments and the threat of default were paused, effectively creating an extended leniency period that has persisted through most of the Biden administration. However, the system resumed normal operations on October 1, 2024, with many borrowers now facing potential default due to missed payments. Internal data indicates that as of March 7, over 4.2 million borrowers were more than 90 days late on payments, and nearly 5 million were late to a lesser extent.
The Uncertain Fate of the SAVE Plan: Former President Joe Biden’s SAVE repayment plan, known for its generous terms and promise of forgiveness, is currently under legal scrutiny with 8 million enrollees in limbo. Experts, including Jason Delisle from the Urban Institute, indicate that the plan is unlikely to survive due to either legislative or judicial action.
Income-Driven Repayment Plans Resume: Legal issues with the SAVE plan also affected other repayment options like Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR). These programs were temporarily unavailable but have recently reopened, creating significant challenges for borrowers who were unable to recertify their income during this period, leading to increased payments.
Public Service Loan Forgiveness Unaffected: The PSLF program, which offers loan forgiveness for borrowers working in public service for ten years, remains unchanged for now despite the Trump administration’s recent call for restrictions on eligibility.
Anticipated Confusion and Challenges: Legal battles and administrative changes have rendered the program complex and difficult for borrowers to understand. With the reduction in staff at the Federal Student Aid office, borrowers may experience increased difficulties in obtaining assistance and navigating the system.
- Potential Agency Transition and Self-Advocacy: A recent announcement by the Trump administration proposed transferring the student loan program to the U.S. Small Business Administration (SBA), which itself is undergoing staffing cuts. With the current uncertainties, borrowers are strongly urged to become their own advocates, familiarizing themselves with their loans and available options through resources like the Federal Student Aid’s website. The leniency period has concluded, and the risk of default is real.
Borrowers are advised to stay informed and proactive in managing their student loans during this turbulent period.
