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President-elect Donald Trump has made clear his dislike of student debt relief. Experts expect him to give up or go back many members of the Biden administration student loan efforts — what he called during the election campaign “vile» and “not even legal”.
Assuming the Trump administration abandons the U.S. Department of Education program new affordable repayment planknown as TO SAFEGUARDborrowers enrolled there will have to move to a different repayment plan with significantly higher monthly payments.
SAVE was supposed to cut the monthly bills of millions of federal student loan borrowers in half.
“For those who are worried about SAVE disappearing, I think that will probably be the case, unfortunately,” said Betsy Mayotte, president of The Institute of Student Loan Advisorsa nonprofit organization that helps borrowers manage their debt repayments.
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SAVE has already been temporarily suspended by a federal court, following legal challenges brought by the Republican attorneys general of Kansas and Missouri. Meanwhile, the Biden administration has subjected SAVE enrollees to an indefinite administrative forbearance in which they owe nothing on their debt.
When Trump returns to the White House in January, borrowers enrolled in SAVE should prepare for this forbearance to end, said Malissa Giles, a consumer bankruptcy attorney in Virginia.
The new administration “is not bound by the position of the previous administration,” Giles said.
If the Trump administration doesn’t continue to defend the SAVE plan in court or the Republican-controlled Congress abandons it altogether, borrowers will likely see their bills return to previous levels, Giles said. For some, bills could be double what they would have paid under SAVE.
“I can’t imagine the stress that will be put on people,” Giles said.
President Joe Biden launched the SAVE plan in the summer of 2023, describing it as “the most affordable student loan plan ever.” SAVE replaced the Department of Education’s former REPAYE option, or revised pay-as-you-earn plan.
About 8 million borrowers have signed up for the new income-driven repayment plan, or IDR, according to the White House.
Under IDR plans, borrowers’ monthly payments are set based on a portion of their discretionary income. They receive forgiveness after a certain period of time, usually 20 or 25 years.
The SAVE plan featured the most generous terms to date.
Instead of paying 10% of their discretionary income per month to cover their undergraduate student debt, as they did under REPAYE, borrowers only had to pay 5%. Those who earned less than about $15 an hour had a monthly bill of $0, and borrowers with smaller balances were eligible for loan forgiveness on an accelerated timeline — in as little as 10 years.
Republican-backed states argued that the Biden administration had overstepped its authority with SAVE and was using the plan as a backdoor way to cancel student debt after the Supreme Court blocked its massive loan forgiveness plan last year.
Before the legal challenges, the Department of Education had already canceled $5.5 billion in student debt for 414,000 borrowers through the SAVE plan.
Supporters of the relief plan argue that student loan borrowers need more affordable repayment options. Nearly a third, or 30%, of borrowers say they have gone without food, medicine or other necessities because of their monthly bills. according to to a new investigation by the Consumer Financial Protection Bureau.
More people will be forced to make these difficult decisions if SAVE goes away, Giles said.
“What challenges will people face when their payments double? she said. “It’s an absolute disaster.”
