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What the Republican trifecta could mean for student loan borrowers

The past four years have been filled with highs and lows for federal student loan borrowers, as nearly 5 million have benefited from $175 billion in debt cancellation provided by President Joe Biden and others have watched their prospects for relief ensnared by litigation. The next four years could be just as tumultuous with Republicans controlling both chambers of Congress and the White House.

President-elect Donald Trump and congressional Republicans are hostile toward Biden’s student loan forgiveness policies, many of which have been tied up in the courts as a result of lawsuits brought by GOP-led states. While Trump has yet to detail his plans for student loans, higher education experts fear the incoming administration will be far more restrictive with debt cancellation and the overall federal student loan program, especially with the help of the Republican majority in Congress.

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Millions of borrowers in low-cost repayment plans could see their monthly student loan bill go up, while programs that canceled the student debt of public service workers such as teachers may be on the chopping block. And some loan programs that parents use to fund their children’s education could be in jeopardy, too, the experts say.

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Low-hanging fruit

In many ways, the Trump administration could upend Biden’s student loan policies without having to do much. Several key policies are tied up in litigation, and the new administration could simply choose to stop defending them.

“Some of the first victories for the new administration’s education policy may be just them sitting on their hands and waiting for some of these policies that never were legal in the first place to be struck down by the courts,” said Michael Brickman, a fellow at the American Enterprise Institute who was a senior adviser in the Education Department in the first Trump administration.

Chief among them is Biden’s signature student loan repayment program, Saving on a Valuable Education Plan, commonly known as Save. The plan offers lower monthly payments and a faster path to loan cancellation. More than 8 million people have enrolled in the program since its debut last fall, and an additional 414,000 have had their debts forgiven. Republican state attorneys general filed two lawsuits against the plan, arguing that Congress never envisioned such generous terms. The courts have blocked the plan’s implementation as the legal process plays out, leading the Education Department to postpone the loan payments for millions of enrollees.

Now the fate of the plan is in the hands of the U.S. Court of Appeals for the 8th Circuit. If the court fails to hand down a decision before Trump takes office, the new administration could take a different position in the case and refuse to continue the fight. Even if the program is deemed legal before the transfer of power, Trump’s administration could rescind the regulation underpinning the program.

“I could see a return to what was in place under the previous Trump administration,” said Scott Buchanan, executive director of the Student Loan Servicing Alliance, a trade group for loan servicers. “They could say, ‘Listen, we didn’t do anything with the repayment plans then, so there’s no need to now.’”

In the absence of Save, enrollees could be put into the standard 10-year repayment plan or other income-driven repayment options. But the future of some of the other income-driven plans is unclear after the 8th Circuit cast doubt on the Education Department’s ability to forgive loans through those programs. No matter what is decided, it will take time to dismantle Save and shepherd millions of borrowers back into repayment. And the more than 8 million borrowers enrolled in Save will probably face higher monthly bills under repayment plans with far less generous terms compared with Save, said Abby Shafroth, director of the student loan borrower assistance project at the National Consumer Law Center.

The courts are also considering what to do about Biden’s second attempt at broad debt cancellation and a new loan forgiveness rule for borrowers defrauded by their colleges.

Republican attorneys general secured an injunction in October barring the Biden administration from implementing the debt relief regulation, an alternative to the plan the Supreme Court struck down in 2023, amid ongoing litigation. If the regulation is deemed illegal, there is no indication the Trump administration would do anything to rescue it. The president-elect has expressed disdain for Biden’s debt cancellation efforts, calling them “vile” at a rally in Wisconsin this summer.

The Trump administration could also sit back and let the courts strike down Biden’s update to the borrower defense to repayment rules, which clears the debts of students whose colleges used illegal or deceptive tactics to persuade them to borrow. The Court of Appeals for the 5th Circuit put the rules on ice in April, siding with Career Colleges and Schools of Texas, which the court said was likely to succeed in proving the Education Department exceeded its authority with the regulation.

“If the administration doesn’t defend these programs, there will be fewer ways for people who are really struggling with debt … to break free of the debt and get from under that burden,” Shafroth said.

The Trump administration could also take a more difficult path to overturn several student loan policies - by rescinding Biden’s recent regulatory updates. That would affect the most recent borrower defense rules as well as updates to the closed school discharge and Public Service Loan Forgiveness programs. The programs would remain on the books but revert to the old terms unless the new administration attempts to rewrite them.

In his first term, Trump tried to eliminate the public service program, which Congress created in 2007 to offer loan forgiveness to people who work 10 years in public-sector jobs such as teaching, nursing or social work. There was never enough political will to end the program, and experts suspect there wouldn’t be this time around, either.

“There’s bipartisan support for helping people who use their degree to become teachers and nurses and other things that genuinely serve their communities,” Brickman said. “Biden’s divisive policymaking led to the erosion of that support, but there’s a pretty wide swath of people who agree that PSLF as originally intended is something they should support.”

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The future of lending

While the Trump administration has yet to release its agenda for federal financial aid, congressional Republicans have a playbook - the College Cost Reduction Act. The legislation, sponsored by Rep. Virginia Foxx (R-North Carolina), failed to get a floor vote this year but could be revived and passed with a Republican majority in both chambers.

Among its many provisions, the bill would end Plus loan programs for graduate students and parents and restrict the amount of federal loans a student can take out. It would also prevent interest capitalization, sunset income-driven plans and require students to pay back only what they would have owed on a 10-year standard repayment plan.

By some estimates, the plan would increase student loan payments and leave some indebted for the rest of their lives. Others argue the legislation could bring about much-needed streamlining of the unwieldy student loan system.

While some moderate Republicans were apprehensive about the bill, there is a path through a process called budget reconciliation, which allows a bill to pass the Senate with a simple 51-vote majority, said Jon Fansmith, senior vice president for government relations at the American Council on Education, which represents colleges and universities. Congressional Republicans could tie the legislation to Trump’s desired tax package. The Congressional Budget Office said the College Cost Reduction Act would save $185 billion over a decade, which could be used to offset other spending.

“With all of the talk about moving an expansive tax package in the first 100 days through reconciliation, that is certainly the kind of thing you could see getting included because it’s a lot of savings that allows for money to be spent on other things,” Fansmith said.

Congressional Republicans could also turn to Project 2025, the right-wing policy blueprint created by the Heritage Foundation, for guidance on reshaping the federal student loan system. The policy agenda, which Trump repeatedly disavowed during the election campaign, calls for phasing out income-driven plans and replacing them with an option devoid of any loan forgiveness. It also encourages the federal government to return to a system in which private lenders made student loans backed by government guarantees - a setup the Obama administration ended nearly 15 years ago.

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Unfinished business

Although the Biden administration has approved roughly $175 billion in student loan forgiveness, not all of that debt has been discharged yet. And if the administration is unable to process all of the discharges before Trump takes over, advocates fear borrowers may wait years to see relief.

“We definitely want to make sure the Biden administration finishes the work they started,” said Ashley Harrington, senior director of policy and advocacy at the Project on Predatory Student Lending. “There are a number of group discharges that are not complete.”

Harrington, a former senior adviser in the Education Department under Biden, said more than 145,000 former students of the defunct for-profit chain Corinthian Colleges are still awaiting a discharge of loans the administration approved for cancellation in 2022.

In Trump’s first term, Education Secretary Betsy DeVos for months held up thousands of borrower defense claims that had been approved by the Obama administration. Harrington anticipates more of the same this time around as well, making it critical for the Biden administration to complete the discharges.