Will Trump’s second term impact student loan borrowers? Here are three possible changes

On November 16, 2024By Pranco

Student loan policies could be overhauled under the incoming administration of newly elected President Donald Trump, with several existing programs likely to undergo changes or be eliminated.

The Biden administration’s Saving on a Valuable Education (SAVE) repayment plan, which currently serves eight million borrowers, is at a crossroads. The program’s fate hangs in the balance as the 8th Circuit Court of Appeals weighs its legality, with no clear indication that the Trump administration would continue to defend the program.

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“The reason the Biden administration is so vigorously defending the rule is that it offered a much more affordable repayment plan,” Persis Yu, deputy director of the Student Borrower Protection Center, told CNBC Make It last week.

Trump’s previous term offers insight into possible policy directions.

According to CNBC, his administration has proposed eliminating public loan forgiveness and cutting funding for several higher education programs. During that period, approximately 99% of PSLF applicants were rejected in 2019, prompting legal action by teachers unions against then-Secretary of Education Betsy DeVos.

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The government’s approach to borrower protection also changed. Rules for institutions were relaxed to demonstrate student success outcomes, resulting in an estimated $11 billion reduction in debt burdens for borrowers affected by questionable academic programs, especially at for-profit colleges.

Project 2025, a policy agenda developed by The Heritage Foundation, outlines more dramatic changes. While Trump has distanced himself from the proposalsthe agenda calls for eliminating PSLF and credit protection programs. More importantly, it proposes to dismantle the Ministry of Education and return to the dominance of private lenders in education financing.

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The shift toward private lending is raising concerns among borrower advocates. “What kind of corporate interests will be protected over the interests of borrowers and students,” Yu told CNBC. Private student loans typically carry higher costs because lenders set interest rates independently, unlike federal loans, where Congress sets the rates.

The transition could leave millions of borrowers in limbo regarding their monthly payments. Biden’s alternative debt relief plan, aimed at long-term borrowers and people in low-value academic programs, faces legal challenges that the Trump administration is unlikely to defend against Republican-led lawsuits.

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The landscape marks a pivot point from March 2020, then Trump initiated the pandemic-related payment pause. That policy lasted throughout his term and provided broad relief to federal loan borrowers.

His return to office signals a potentially different approach to student debt management, emphasizing private sector solutions over federal programs.

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This article Will Trump’s second term impact student loan borrowers? Here are three possible changes originally appeared on Benzinga.com