Student Loan Programs in Jeopardy Under Trump Administration
With the Republicans in control of Congress and President Donald Trump back in the White House, experts are warning that several student loan programs may be at risk. These programs, designed to provide relief to borrowers, could be significantly impacted by the new administration.
The SAVE Plan: A Program in Limbo
The Saving on a Valuable Education (SAVE) plan, launched in 2023, was hailed as the most affordable student loan plan ever. It cut monthly bills in half and shortened the timeline to loan forgiveness for borrowers with smaller balances. However, the plan has been on hold since last year due to legal challenges from Republican attorneys general in Kansas and Missouri. Experts believe the plan is unlikely to survive a second Trump term, with possible methods to kill the plan including abandoning its defense in pending lawsuits, issuing new regulations to revoke it, or Congress passing a law to do away with it.
Bankruptcy Policy Under Threat
For decades, student loan borrowers found it nearly impossible to walk away from their federal student debt in bankruptcy. The Biden administration changed that with updated bankruptcy guidelines in 2022, making the process less arduous. However, experts worry that Trump may rescind this guidance, making it harder for borrowers to discharge their federal student loans in bankruptcy.
Other Programs at Risk
House Budget Committee Republicans are also proposing reforms to Public Service Loan Forgiveness, including limiting eligibility for the program. They’re also considering eliminating the student loan interest deduction, a tax break that allows qualifying borrowers to deduct up to $2,500 a year in interest paid on eligible private or federal education debt.
Consequences for Borrowers
More than 40 million Americans carry federal student loans, with outstanding debt exceeding $1.6 trillion. If these programs are eliminated or significantly altered, borrowers may face increased financial burdens and reduced access to debt relief. Experts urge borrowers to stay informed and prepared for potential changes to these programs.
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