Paying off student loans can seem like an impossible task, especially when high interest rates mean loan amounts keep increasing. But student loan relief can provide a lifeline for borrowers in need.
A 2024 survey by the Consumer Financial Protection Bureau revealed that nearly 61% of borrowers who received debt relief reported the relief gave them the opportunity to make a beneficial change in their life sooner than they otherwise could have.
In August 2022, the Biden-Harris administration launched the Saving on a Valuable Education (SAVE) plan to help borrowers better manage their student loan payments. This income-driven repayment plan offers several benefits to borrowers:
Loan payments are calculated based on a borrower’s income and family size, rather than basing payments on their loan balance.
Qualifying borrowers’ remaining balances can also be forgiven after a certain number of years.
Many borrowers’ monthly payments are reduced, and some borrowers don’t owe monthly payments at all.
If borrowers keep up with their monthly payments, the Department of Education won’t charge monthly interest that isn’t covered by the payments, so borrowers’ balances will decrease, and they can more easily pay off the loans.
While on the campaign trail, Trump called President Joe Biden’s planned student loan forgiveness “vile,” blaming student loan relief for increasing the federal deficit.
Bill Townsend, founder and CEO of College Rover, predicted that Trump will end the SAVE plan as part of a concerted effort by many conservatives to change the appeal and direction of college education.
“Interestingly enough, there is a contractual law issue that will arise from public servants who were contractually bound to certain jobs in exchange for student loan forgiveness,” Townsend explained. “Assuming SAVE, which included this preexisting loan forgiveness contract, is voided, there will be the potential for a class action lawsuit against the U.S. government.”
However, Townsend predicted that Trump could void the lawsuit with an executive action.
According to Reilly Renwick, chief marketing officer at Pragmatic Mortgage Lending, ending the SAVE plan would disrupt income-driven repayment options that are essential to many borrowers, particularly those with lower incomes and larger student loan debt.
“A move to roll back these provisions could significantly affect [borrowers’] financial planning and repayment strategies,” he explained.
Renwick predicted that if the SAVE plan is terminated, many borrowers’ monthly payments would increase.
“Those enrolled in income-driven repayment programs would feel the brunt of the impact,” he explained. “This is especially prevalent for borrowers with a larger student loan balance but lower incomes who rely on reduced payments, as they soon would have to face quite the financial strain if the plan were dismantled.”
In November, the Biden administration began the process of implementing two student loan repayment options. Recognizing that Trump likely would end the SAVE plan, these new plans offer additional support to borrowers.
Income Based Repayment (IBR), an older program, allows borrowers to make monthly payments based on their incomes, but those rates are often higher than the rates provided by the SAVE plan.
The Pay As You Earn (PAYE) plan can give borrowers reasonable monthly payment amounts and features a 20-year student loan forgiveness term. To qualify, borrowers must have a financial hardship and must meet restrictions on when they took out federal student loans.
According to Renwick, it’s highly unlikely that any large-scale student loan forgiveness initiatives will be planned under the Trump administration.
“Given Trump’s prior opposition to broad forgiveness programs, it’s expected that any relief efforts would be narrower in scope,” he said, “potentially focusing on more targeted groups rather than sweeping cancellation policies.”
Townsend recommended that borrowers start planning for the potential implications of the student loan changes that Trump is likely to implement. He suggested that borrowers stop any frivolous spending, including curtailing vacations and eating out. Doing so can help borrowers to save money and better prepare for the larger loan payments they may face.
He recommended that individuals considering attending college reassess their college options. Local and community colleges may provide more affordable programs than out-of-state public or private schools. Even if you receive a scholarship from a school that’s far away, recognize that you will still be responsible for travel costs, and those can add up.
“Borrow as little as possible and realistically look at career choices and potential salaries to make sure you can afford the education you have chosen,” Townsend advised.
When it comes to taking out student loans, Townsend highlighted the importance of being sure that you fully understand the loan. Take the time to read every contract. If you don’t understand the terms, ask a family member, family friend or high school counselor for help understanding the loan so that you can make a well-informed decision.
