As Donald Trump prepares for a potential return to the White House, the student loan forgiveness policies introduced by President Joe Biden are facing significant uncertainty.
In addition to the jeopardy surrounding debt relief programs, borrowers may soon encounter higher monthly payments, even if they were not anticipating loan forgiveness.
Here’s a detailed breakdown of what lies ahead for student loan borrowers.
SAVE Plan Elimination Could Impact Borrowers
The SAVE plan, an income-driven repayment program designed to lower monthly payments and offer interest subsidies, could soon be a thing of the past. Initially established by the Biden administration without direct Congressional approval, it can be repealed through the same process.
With the 8th Circuit Court of Appeals likely to issue a ruling against the program and Trump’s incoming administration not expected to challenge such decisions, the plan may be dismantled swiftly.
The repeal of the SAVE plan, combined with the end of its related forbearance, means borrowers will face increased payments as they return to repayment schedules.
Forgiveness Programs Set to Be Terminated
Several student loan forgiveness initiatives proposed by the Biden administration could be axed under the new administration. These include:
- The SAVE Plan, which allows some borrowers to receive loan forgiveness within 10 years if they have smaller initial balances.
- Plan B Forgiveness, aimed at wiping out debt for borrowers whose loan amounts exceed what they originally borrowed due to compounding interest or poor educational outcomes.
- Hardship-Based Forgiveness, intended to aid borrowers at high risk of default due to financial difficulties.
With federal courts already blocking SAVE and Plan B, the new administration is likely to discontinue pursuing these initiatives. Consequently, millions of borrowers who anticipated relief might find themselves back in repayment.
Forbearance Relief Ending Sooner Than Expected
Over 8 million borrowers have enjoyed forbearance due to legal battles surrounding the SAVE plan. During this period, no payments were required, and no interest accrued. The Department of Education had initially signaled that this relief could last until mid-2025 as appeals were expected to continue.
However, with Trump’s likely disinterest in appealing court rulings, the forbearance could end much sooner. Once it concludes, interest accumulation will resume, and payments will restart, creating financial strain for many.
Higher Payments with Income-Based Repayment (IBR)
With the anticipated demise of the SAVE plan, many borrowers will have to fall back on the Income-Based Repayment (IBR) plan. The IBR plan, unlike the more recent income-driven plans, is entrenched in legislation and is harder to modify or repeal.
- Borrowers who took loans after July 1, 2014, can expect lower payments and a 20-year forgiveness term.
- Those with loans taken before this date face higher payments and a 25-year forgiveness term.
For instance, a borrower with an Adjusted Gross Income (AGI) of $65,000 would have paid only $130 per month under the SAVE plan. Under IBR, that payment could jump to over $350 per month (for post-2014 borrowers) or $530 per month (for pre-2014 borrowers).
| Plan | Income | Monthly Payment | Forgiveness Term | Plan Availability |
|---|---|---|---|---|
| SAVE | $65,000 | $130 | 10 years | Likely Eliminated |
| IBR (Post-2014) | $65,000 | $350 | 20 years | Remains Available |
| IBR (Pre-2014) | $65,000 | $530 | 25 years | Remains Available |
| ICR | $65,000 | $400 | 25 years | May Be Reopened |
| PAYE | $65,000 | Similar to IBR | 20 years | Potentially Reopened |
Income Recertification Looms Large
Many borrowers have been able to avoid updating their income due to the COVID-19 payment pause, which extended recertification dates into 2025.
However, with the impending resumption of income-driven repayment (IDR) recertifications, borrowers who have seen their income rise since pre-pandemic times may face dramatically higher monthly payments.
For example, consider a borrower with a previous AGI of $65,000 in 2019, resulting in a SAVE plan payment of $130 per month. If her AGI has now risen to $80,000, the switch to IBR could push her monthly payments to as much as $720 — a significant increase from her previous payments.
What will happen to the SAVE plan under the Trump administration?
The SAVE plan is likely to be repealed either through court rulings or by the new administration. This could result in borrowers facing higher monthly payments.
Will student loan forgiveness programs still be available?
The current forgiveness programs proposed by the Biden administration, such as Plan B and hardship-based forgiveness, are likely to be discontinued, leaving borrowers with fewer options for relief.
How can I prepare for income recertification in 2025?
Borrowers should update their income details well in advance of their recertification deadlines. If your income has increased since 2020, be prepared for potentially higher payments.