Borrowers should expect updates to student loan repayment plans and forgiveness policies when the Trump administration takes over next year. This year has seen much back-and-forth regarding student loan relief efforts, leaving borrowers confused about their options.
Here’s what borrowers and financial aid teams need to know:
ICR and PAYE Expected to Return
The Department of Education released an Interim Final Rule (IFR) that will reopen applications into the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) student loan repayment plans effective December 15, 2024.
The Department of Education planned to phase out ICR and PAYE and replace them with the SAVE plan. Their return offers income-driven repayment options that better comply with the court’s arguments against the SAVE plan, which is currently under an injunction.
Both plans offer affordable monthly payments and potential forgiveness after 20 or 25 years unless time-based student loan forgiveness is repealed by the GOP-led bill.
Borrowers on SAVE may change to ICR or PAYE before SAVE gets struck down officially, sometime in early 2025.
What Borrowers Can Expect in 2025
Expect the Repeal of the SAVE Plan
GOP-led states have challenged the legality of the SAVE plan and their challenges have held up in court. The SAVE plan is currently under a federal injunction pending a decision by the 8th Circuit Court of Appeals. If the appellate court strikes down the SAVE plan, as the lower courts have done, then that standing will most likely stand. There is no reason to expect the Trump administration to appeal the court’s decision to the Supreme Court.
Expect a Push for the College Cost Reduction Act
This week, the House elected Tim Walberg (R-MI) as the chairman of the House Committee on Education and Workforce, a position previously held by Virginia Foxx (R-NC). Foxx has urged Republican lawmakers to pass the College Cost Reduction Act or include it in the upcoming tax cuts extension.
The bill would replace all existing income-driven student loan repayment plans with its “Repayment Assistance Plan” and would eliminate time-based forgiveness. Borrowers under the new plan would only receive forgiveness after they repaid “the total amount of principal and interest that the borrower would have repaid under the Standard repayment plan.”
Expect Changes to Student Loan Repayment Policies
The College Cost Reduction Act would also eliminate Parent PLUS and Graduate PLUS loan programs, the Borrower Defense to Repayment, and Closed School Discharge policies. While there’s no certainty the bill will pass in its current form, the Republicans do have control of Congress and have made it clear they plan to reshape higher education. It will be important for financial aid departments to track these changes to communicate policy updates to students.
What Borrowers Should Do Now
Borrowers should stay informed and prepare for changes to student loan repayment. Here are some good steps to take before the end of the year:
- Review Your Current Repayment Plan: Make sure you’re able to log into your account with your student loan servicer(s) and know which repayment plan you’re currently in. If you’re unsure who your servicer is or what repayment plan you have, you can always ask an IonTuition student loan counselor.
- Update Your Contact Information: Ensure your contact information is up-to-date with your servicer. Many borrowers tend to create their accounts with their school email addresses and won’t stay on top of changes to their accounts. IonTuition account holders are also notified when there are critical student loan repayment updates to their account.
- Explore Your Options: If you’re struggling to make your payments, you have options! You can compare and apply for income-driven repayment plans directly through the IonTution portal. Talk to an IonTuition counselor today for help managing your repayment.