The fate of several student loan forgiveness and repayment programs remains uncertain as President-elect Donald Trump returned to Washington on Wednesday to meet with congressional Republicans and President Joe Biden.
Key Biden administration student debt relief initiatives, including the SAVE plan and mass debt cancellation, appear to be in increasing danger. At the same time, some more targeted debt relief pathways may be safe. Meanwhile, the future of several other popular loan forgiveness programs that are more firmly rooted in federal law may be tougher for the incoming Trump administration to eliminate next year.
Here are six critical updates on federal student loan forgiveness and repayment initiatives as Trump plans his return to the White House.
SAVE Plan Will Likely End In Months, Cutting Off Paths To Student Loan Forgiveness
More than eight million borrowers have been stuck in limbo since August after a federal court, in response to a legal challenge brought by several Republican-led states, blocked the SAVE plan. The Biden administation unveiled SAVE last year as the most affordable income-driven repayment plan ever, providing borrowers with lower payments, a waiver of excess interest, and accelerated student loan forgivenes.
But following last week’s election results, the SAVE plan’s future is in serious doubt. While the Trump transition team has not signaled a specific intent to do away with the SAVE plan, they may not need to do anything at all. At a critical court hearing in October, a three-judge panel of the 8th Circuit Court of Appeals seemed more than willing to strike down the SAVE plan. If the court does that, the Trump administration could simply not appeal that decision, allowing the ruling to stand. That would effectively kill the SAVE plan without any specific action by a Trump Education Department.
Depending on the scope of the 8th Circuit’s order, student loan forgiveness under several other IDR plans issued through the same regulatory process that created the SAVE plan could also wind up being blocked, as well. This could include the Pay-As-You-Earn and Income-Contingent Repayment plans. ICR, in particular, has offered student loan forgiveness to borrowers after 25 years since the plan was first estbalished in 1994, so a court order striking down that benefit would upend 30 years of law and bipartisan guidance provided to borrowers.
A ruling could be issued within the next several months.
Education Department To Reopen PAYE And ICR Plans So Borrowers Can Pursue Student Loan Forgiveness
In light of the SAVE plan’s likely demise, the Biden administration announced that it intends on reopening access to the PAYE and ICR plans so that borrowers have additional pathways to pursuing student loan forgiveness. The Education Department had cut off PAYE and ICR for most new borrowers as part of the SAVE plan rollout to simplify the IDR system.
“The Department is preparing a plan that would open the PAYE and ICR repayment plans to new enrollees, who otherwise meet the eligibility requirements,” said the Education Department in updated guidance last month. “Doing so will allow the Department to meet its obligations under the Higher Education Act to offer borrowers a repayment option through the same authority used to create the SAVE plan. For borrowers who would prefer to make payments during this time period — such as borrowers pursuing PSLF or low-income borrowers who would owe no monthly payments — enrolling in PAYE or ICR may be an option to consider. The Department will share more in the coming weeks on the timeline for this repayment plan change.”
While the department hopes to open up PAYE and ICR sometime this fall, it’s unclear if the incoming Trump administration will honor that process in January.
$6 Billion In Student Loan Forgiveness Under Class Settlement Upheld
Meanwhile, some borrowers got some good news last week as a $6 billion settlement providing loan forgiveness and other debt relief was upheld by a federal appeals court.
The Sweet v. Cardona settlement resolved a multi-year legal battle between hundreds of thousands of student loan borrowers and the prior Trump administration over stalled or rejected Borrower Defense to Repayment applications. The Borrower Defense program can provide debt relief to people who were misled or defrauded by their school. The litigation continued during the Biden administration, which finally reached a court-approved settlement with the class of student loan borrowers. Several schools impacted by the settlement appealed, but last week, the 9th Circuit Court of Appeals upheld the agreement.
“This decision validates the fact that each of our clients is entitled to relief under this settlement and that desperate action by three educational companies cannot stop their long-awaited relief,” said Eileen Connor, President and Executive Director of the Project on Pedatory Student Lending, the organization representing the class of borrowers, in a statement last week. “We will continue to see this case through to the end, whether that means fighting meritless appeals or ensuring that the Department of Education and servicers do their jobs to deliver the relief that they legally owe our clients.”
With the debt relief and associated loan forgiveness approved by a federal court, and with much of the relief already provided, it is unlikely that the Trump administration could unwind or block the agreement from continuing to move forward.
Broad Student Loan Forgiveness Not Officially Dead Yet, But Likely Will Be Soon
President Biden’s mass student loan forgiveness plans are not officially over. But they probably will be soon.
The adminisration’s “Plan B” student loan forgiveness initiative would have wiped out the federal student loan debt for several categories of borrowers, including those have experienced extreme interest accrual and people who first entered repayment more than 20 or 25 years ago. But that program was blocked by a federal court in October. And as with the SAVE plan, if that court winds up striking down the initiative, the incoming Trump administration could simply let that decision stand.
“On Oct. 3, 2024, the U.S. District Court for the Eastern District of Missouri issued a preliminary injunction on the proposed student loan relief regulations,” says updated Education Department guidance on the program, indicating that relief under the plan is currently blocked.
Meanwhile, the Biden administration unveiled proposed regulations for a new hardship student loan forgiveness pathway last month. But the rules not expected to be finalized until 2025, and the Trump administration is likely to kill the program before it’s ready for implementation.
Federal Watchdog Agency Issues Warning On Student Loan Forgiveness And Repayment Chaos
On Wednesday, the Consumer Financial Protection Bureau released survey results suggestiong that millions of borrowers are struggling as the fate of several loan forgiveness and repayment programs remains in doubt. The CFPB is a federal finanical watchdog agency that oversees much of the financial services sector, including student loan servicing.
“The survey, conducted between October 2023 and January 2024, gathered data from a representative sample of student loan borrowers as the federal student loan payment pause ended and many borrowers returned to repayment,” said a CFPB statement. “The report found nearly 61% of borrowers who received debt relief reported positive life changes.”
Meanwhile, a significant portion of borrowers may be unaware of their repayment plan options, including income-driven repayment plans that can lower monthly payments. “Nearly 42% of federal student loan borrowers have only ever used the standard repayment plan, with many unaware of alternative options that could help lower their payments,” said the CFPB.
“Our survey reveals that student loan debt relief has been a lifeline for many borrowers, allowing them to make positive changes in their lives,” said CFPB Director Rohit Chopra. “However, it’s clear that many borrowers are struggling with repayment, and there is more work to be done to ensure repayment options are accessible and effective.” This may be particular important as many borrowers may see significant increases to their monthly payments next year.
Many Uncertaines Remain About Other Student Loan Forgiveness Programs
While the SAVE plan and mass student debt relief will likely end, and relief under the Sweet v. Cardona settlement should be safe, the future of several other important federal student loan forgiveness and repayment plan programs still remains uncertain.
In particular, if SAVE gets struck down, and student loan forgiveness under the PAYE and ICR plans also gets cut off, the only remaining income-driven option for many borrowers will be Income-Based Repayment. While IBR may result in significantly higher monthly payments, IBR was established by Congress and, therefore, would be more difficult for the Trump administration to eliminate, as it would likely require new legislation to be passed by Congress.
Similarly, the PSLF program was also created by Congress. While the Trump administration could make significant changes to the program — such as eliminating new regulations the Biden administration put into effect last July which expanded access to the program and reduced barriers — a wholesale repeal would require congressional action. It is too soon to know at this juncture whether PSLF or IBR will face serious attempts at repeal.
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