What Trump’s second term could mean for student debt (video)

Donald Trump’s return to the Oval Office could mark a major rollback of efforts to alleviate student debt — at least if his campaign comments and results in his first term are any indication.

During his last administration, Trump took steps to limit debt forgiveness for students defrauded by their schools and proposed eliminating the public loan forgiveness program. Conservative activist groups have urged the president-elect to take similar action this time.

And in 2023, when the Supreme Court struck down President Joe Biden’s first attempt at a sweeping student debt forgiveness program, Trump applauded. The attempt to wipe out some $430 billion of borrowers was “very, very unfair to the millions and millions of people who paid their debts through hard work.” he told a crowd in New Jersey, adding that it was just “a way to buy votes.”

All told, the Biden administration has managed to relinquish $175 billion in student loans through various programs. But several of his major initiatives aimed at further reducing America’s $1.7 trillion education loan pile have been stalled by legal challenges or are still being drafted by regulators, leaving Trump plenty of room to try to pull them off to wrap if he wishes. .

Based on a review of Trump’s website and platform, as well as conversations with lawyers, it does not appear that Trump’s campaign has made any specific proposals regarding student debt, although he has called for eliminating the Department of Education. A campaign spokesperson did not respond to a request for comment on the new administration’s plans.

Here are the debt forgiveness initiatives still in limbo – and what could change.

Read more: Am I eligible for student loan forgiveness?

Biden’s plan B

The Biden administration’s second attempt at widespread student loan forgiveness — nicknamed “Plan B” — appears to be in jeopardy. In April the The Ministry of Education has proposed new rules that would allow the country to forgive debt for an estimated 30 million Americans, including former students who owed more than their original principal or had been paying off their balance for more than two decades.

That plan was done blocked repeatedly into effect thanks to a lawsuit by Republican attorneys general. Trump’s Department of Education could suspend it for good by simply refusing to finalize the program’s rules, since they were never officially completed. The same goes for a preliminary proposal the Biden administration unveiled last month that would have allowed this eliminate debts for borrowers in financial difficulties.

TO RESCUE

The Biden administration’s generous loan repayment plan, known as SAVE, may also be at risk. The program would reduce monthly payments on student loans to just 5% of a borrower’s discretionary income, up from 10% now, while accelerating the path to forgiveness. But the plan is embroiled in another lawsuit filed by states led by the Republican Party, and Trump could theoretically choose to stop making the case. His administration could also use formal regulations to replace the program entirely, although that would likely be a lengthy and intensive process.

In the meantime, there are 8 million borrowers enrolled in SAVE whose loans are currently suspended interest-free until the spring. Trump’s team will have to decide whether these individuals should start paying back again.

Borrower protection

It’s a similar story with the borrower defense rule, which allows former students to seek debt relief if they’ve been defrauded by their university, while the school foots the bill.

Trump’s first-term Secretary of Education, Betsy DeVos, significantly reduced the rule critics claim that the changes blocked “almost every opportunity for individual borrowers” ​​to actually take advantage of them. The Biden administration rewrote the regulation again in 2022 to make qualification easier, but that effort has also been blocked by lawsuits. In its Project 2025 agenda, the conservative Heritage Foundation urged the next Republican administration to repeal the new version.

Public Service Loan Forgiveness

One of the Department of Education’s top priorities during the Biden years has been making it easier for borrowers to take advantage of the Public Service Loan Forgivenessthat forgives the debts of individuals who make payments for 10 years while working for the government or a nonprofit organization.

The program had a 99% rejection rate when borrowers first started applying for aid under the Trump administration. That was in large part due to the complicated rules that tripped up many former students, such as strict requirements about what types of payments did or did not count toward forgiveness. The Biden administration began relaxing those rules starting in 2021, and has so far given permission $73.7 billion in debt although the program.

It is unclear how Trump will deal with PSLF in the future. His last administration repeatedly called on Congress to abolish the program.

“There is no need to encourage one type of work and one type of work over another,” DeVos told lawmakers in 2020. Such a dramatic move would still require an act of Congress, but short of that, the new administration could still make administrative or bureaucratic changes that would make eligibility more difficult. The authors of Project 2025 have argued that if Trump’s team cannot end PSLF, it will be the Biden administration rules broaden the program.

Jordan Weissmann is a senior reporter at Yahoo Finance.

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