March 25 (UPI) — Financial aid advisers on college campuses across the United States are sharing in the confusion of student loan borrowers as the Trump administration tries to reshape education.
Borrowers are blocked from accessing income-driven repayment options while awaiting the Court of Appeals’ final ruling on the Saving on a Valuable Education Plan introduced by the Biden administration. President Donald Trump formally ordered the end of the Department of Education and for student loans to be moved to the Small Business Administration.
Current and soon-to-be borrowers, financial aid advisers and advocacy organizations are unsure about what comes next.
“A lot of what we’re hearing is what everyone is hearing,” Megan Walter, senior policy analyst with the National Association of Student Financial Aid Administrators, told UPI. “‘What is actually happening? Can they actually do this? What does it mean for student loans and Pell grants?’ These are questions we don’t have answers for.”
Student loan borrowers hold nearly $1.8 trillion in federal and private student loan debt in the United States.
President Donald Trump speaks to school students after signing an executive order to begin the process of dismantling the Department of Education at the White House in Washington, D.C. on Thursday. Photo by Bonnie Cash/UPI
Repayment plan applications down
A federal court in Missouri has issued an injunction blocking the U.S. Department of Education from administering the SAVE Plan and parts of other Income Driven Repayment plans.
The SAVE Plan is not the only plan that has been disrupted. Income-Based Repayment, Income Contingent Repayment, Pay As You Earn and Revised Pay As You Earn plans are also suspended.
The SAVE Plan was the most inexpensive repayment plan offered by Federal Student Aid. Borrowers under this plan have been in forbearance since August due to the litigation against it.
On Jan. 15, days before Trump was sworn into office, the Department of Education published an update on the SAVE Plan, noting that borrowers will remain in 0% interest forbearance until the fall of 2025.
The Department of Education has updated its guidance to say that payments will not resume until December at the earliest.
For borrowers working toward Public Service Loan Forgiveness, time spent in forbearance does not count toward loan forgiveness.
“There were already 8 million people enrolled in SAVE,” Aissa Canchola Bañez, policy director of the Student Borrower Protection Center, told UPI. “We also know there are 40 million-plus borrowers that have student loan debt. Many are already struggling with rising costs across the board. We knew we had a backlog of around 1 million applications before the Trump administration removed the online application.”
“We are hearing from borrowers every day who are terrified of the fact they could potentially see payments spike or just cannot afford to keep up with their payments,” she continued.
The American Federation of Teachers labor union filed a lawsuit against the Department of Education last week for blocking access to income-driven repayment applications. The lawsuit argues that this puts borrowers at risk of defaulting on their loans and denies public service workers from working toward student loan forgiveness.
The Trump administration has not given notice of when applications will be available online again. It has also not offered guidance about what will happen to borrowers who are enrolled in the SAVE Plan.
Plans of action
As borrowers wait for new developments on income-driven repayment plans, such as the return of online applications, Bañez suggests taking steps to ensure repayment progress is protected.
“The advice we have been giving to borrowers is to protect yourself,” she said. “Do this by going into the [Federal Student Aid] web portal. Download payment history. Take screenshots of IDR forgiveness. Save that information into your records and have that handy for if there are any major changes made that could result in any of that information being lost.”
Borrowers are also advised to contact their loan servicer to better understand what relief or assistance may be available to them.
One lesser-known option, according to Bañez, is casework assistance offered by members of Congress. Borrowers can contact their representatives and senators demanding casework assistance if they are experiencing issues with federal student loans or loan servicers. This includes difficulty contacting loan servicers, errors with credit reporting, lost paperwork or loan information and problems filing applications.
“Take advantage of this tool, reach out to your members of Congress and request casework assistance,” she said. “Demand that they help.”
Borrowers may be able to get on hardship forbearance or a deferment if they are struggling to pay their loans at the time.
Betsy Mayotte, president of the Institute of Student Loan Advisors, told UPI there is unlikely to be a repayment plan as inexpensive as the SAVE Plan for most borrowers.
“They’re going to have to try to budget for the next lowest repayment plan. It’s probably Pay As You Earn of what’s called the new IDR,” she said.
Education Department impact on student loans
The potential ending of the Department of Education and shift of student loans to the Small Business Administration are not simple propositions.
The Department of Education is a congressionally approved cabinet-level agency. Congressional action is required to abolish it. Partisan talk about dismantling the department has carried on for decades but this has not gained momentum with a majority of lawmakers historically.
“If they change where the loans are serviced, and that is a big if, all that means is a different agency is overseeing the program,” Mayotte said. “That doesn’t change the terms and conditions of the loan.”
Mayotte explained that most of the day-to-day operations related to managing student loans is done by vendors or student loan servicers, not the Department of Education directly.
“If the loans move, I don’t expect there will be a big change in the day-to-day for student loan borrowers. I don’t even expect there will be a database change,” she siad.
If changes in which department oversees student loans somehow invalidated the estimated $1.8 trillion in student debt, those changes would not be made, Mayotte added.
“I expect that if that legal theory has any legs at all they’re not going to move the loans,” she said. “Or Congress will change the law.”
As for shifting the responsibility of student loans to the Small Business Administration, Walter expects it to be challenging.
“The SBA is not set up to manage $1.8 to $2 trillion in federal student loans,” Walter said. “Moving FSA to the Small Business Administration would be such a dramatic restructuring that it would come with a host of logistical and legal implications. It would require not only transferring the administration of aid over but oversight. There’s no way it doesn’t cause disruptions to students receiving their aid.”
Budget reconciliation
House Republicans have a goal to cut trillions in federal spending through the process of budget reconciliation. They plan to cut about $300 billion from education spending.
How the SAVE Plan ultimately ends will have major implications on how Congress cuts funding from other education services, Mayotte said.
“We know SAVE is done. What we don’t know is who is going to bury the body: the court or Congress” she said. “If it’s Congress, that means Congress ‘saved’ $130 billion. If the court kills it, Congress has to find another $130 billion. Then I worry about other services.”
Paul Peterson, director of Harvard University’s Program on Education Policy and Governance, told UPI there is much uncertainty over how Congress will move forward and how the judicial branch will react to the Trump administration’s actions on education.
The courts limited the Biden administration’s plans for student loan forgiveness and debt relief with the Supreme Court affirming those limitations. Notably, President Joe Biden’s attempt to grant broad student loan forgiveness was through executive order.
“There’s a lot of variation of opinion among the conservative side of the Supreme Court,” Peterson said. “The Supreme Court recently decided that if it’s a major issue, the executive branch cannot change policy. It has to be done by statutory enactment if it’s a major policy issue. That placed important limits on the Biden administration.”
“‘They said you don’t have the power to do this. This belongs to Congress,'” Peterson continued. “If the Supreme Court said that in the case of the Biden administration, are they going to turn around and rule differently in the case of the Trump administration?”
