For Alexander Lundrigan, the Trump administration’s treatment of borrowers has represented a “gut-wrenching reversal.” He owes $82,000 in student loans and works for an organization that advocates for young adults paying back student debt.
While President Joe Biden’s administration made extensive efforts to alleviate the burden of student loan debt for millions of borrowers, President Donald Trump is cracking down on them and trying to speed up repayment.
In his first few months in office, Trump restarted collections on borrowers in default and put tighter restrictions on debt relief programs. More recently his new tax bill cuts the number of income-based repayment options from four to two. Critics like Lundrigan say both of those remaining options will increase borrowers’ monthly payments.
Trump officials say they want to simplify repayment and save taxpayers money.
“None of the decisions they’re making are taken from a place of the borrower’s perspective,” said Lundrigan, a Rogers Park resident who works as a policy manager for Young Invincibles, which mobilizes young adults around higher education and other policy issues. “That’s really frustrating for borrowers coming from a previous administration that was very in tune with what borrowers need.”
Millions of Americans benefited from Biden’s student loan initiatives but are now in limbo amid multiple court challenges and an onslaught of changes from the Trump administration.
“I don’t think there’s making sense of the current student debt landscape because I don’t think this administration wants to make sense of it for borrowers,” Lundrigan said. “They just want them to start repaying.”
WBEZ spoke to Lundrigan and other student loan researchers to find out what borrowers can do now to prepare for upcoming changes and to protect themselves from payment delinquency and default.
Both outcomes have severe consequences. Courts can require employers to withhold money from the paychecks of people who are behind on loan payments. Falling behind can also lower a borrower’s credit score. All of this can impact a person’s ability to meet their basic needs, including their ability to rent housing.
4 tips for student loan borrowers
1. Be proactive
Get familiar now with the remaining repayment options that will be available, especially if you are one of nearly 8 million borrowers enrolled in the SAVE plan. The SAVE plan from the Biden-era offers the most affordable monthly payments and shortest time to debt cancellation, but the Trump administration has repeatedly called it illegal and it is currently held up in court by legal challenges.
This has left SAVE enrollees in limbo. They have been unable to make payments for the past year. But the Trump administration announced it would start charging interest in August on those stuck in this payment pause.
Borrowers will still not be able to make payments towards their debt principal, but can make payments toward their interest so that their debt does not balloon. Those payments, however, will not be included in payment counts for loan cancellation under an income-driven plan or Public Service Loan Forgiveness. The Public Service Loan Forgiveness program cancels the debt of borrowers who have worked in public sector jobs and made payments for 10 years.
Michele Zampini, an associate vice president at The Institute For College Access And Success, said SAVE plan borrowers who can afford to make payments under a different plan should consider switching so they can progress towards debt relief.
“Things are really murky right now, but we do know now that the SAVE plan is truly on its last legs,” Zampini said. “Make an informed decision and then get that application started, because we know there can be quite a period between when someone submits an application for an income-based plan and when they’re actually enrolled.”
The U.S. Department of Education is severely understaffed as a result of Trump-administered layoffs and has a backlog of 1.5 million applications for income-driven repayment plans, according to a recent court filing.
Borrowers who submit an application may be placed in a “processing forbearance” for up to 60 days, which means they will not have to make payments during this time. Interest will accrue but the time will count towards debt relief under Public Service Loan Forgiveness.
2. Get informed
Federal officials have until July 2028 to phase out existing repayment plans like the PAYE and Income-Contingent Repayment options, which shield a portion of a borrower’s income from repayment so they can cover basic needs. But Lundrigan warns these plans could go away sooner.
Ultimately just two federal repayment plans will remain: Income-Based Repayment and the Repayment Assistance Plan.
The Income-Based Repayment plan requires borrowers to pay 10% or 15% of their “discretionary” income, defined as any income that exceeds 150% of the federal poverty line. The purpose is to protect part of a borrower’s paycheck so they can cover basic needs like housing and food while staying current on repayment.
“If their income falls below a certain level, they aren’t required to make payments at all,” said Lesley Turner, an associate professor of public policy at the University of Chicago.
The plan also requires borrowers to make payments for 20 years before the remainder of their debt is canceled, regardless of how much they owe.
The other option, a new one created by Congressional Republicans called the Repayment Assistance Plan, requires 30 years of payments before a borrower’s debt is canceled.
This option does not shelter any portion of a borrower’s income. Instead, borrowers pay 1% to 10% of their total gross income each month. Those earning more pay a higher percentage.
According to an analysis by Zampini’s group, borrowers will pay much more under this plan each month. For instance, a family of four earning $81,000 a year would pay $36 a month under the SAVE plan compared to $440 a month under the Repayment Assistance Plan.
On the flip side, the government will subsidize some of the monthly interest not covered by monthly payments under this plan so loan balances do not balloon. It also offers a $50 monthly credit per dependent.
“For low-income borrowers it provides less protection, because all borrowers on this plan would have to pay at least $10 a month, which doesn’t sound like that much, but for someone with very low or zero earnings that can still be a difficult burden,” Turner said.
3. Keep good records
Borrowers should regularly download or screenshot records from their loan servicer accounts for evidence of payments and application submissions. The latter is extremely important as a reduced Department of Education struggles to keep up with applications for repayment plans.
“If you’re in a position where you have to go through a complaint system or you have to go through a loan ombudsman or you have to register a complaint with your servicer, you have that evidence and that paper trail that you’ve taken all the steps on your end,” Zampini said.
4. Get help
Lundrigan said borrowers who are struggling to get through to their loan servicers or who cannot afford their payments can reach out to national groups like the Student Borrower Protection Center, as well as local groups like the Illinois student loan ombudsman.
He added that advocacy groups like Young Invincibles are looking to hear borrowers’ stories.
“If you are struggling with this, we need your story. We need to be able to share it and uplift it, because that’s how we put pressure on the [Congressional] representatives,” Lundrigan said. “When they start hearing from their constituents and they start hearing how it’s impacting them, that’s when things actually start moving.”