What Trump’s second term could mean for student debt (video)

Donald Trump’s return to the Oval Office could mean a major scaling back of efforts to relieve student debt — at least if his campaign comments and first-term record are any indicator.

During his last administration, Trump took steps to limit debt cancellation for students defrauded by their schools and proposed eliminating the Public Service Loan Forgiveness program. Conservative activist groups have urged the president-elect to take similar action this time around.

And in 2023, when the Supreme Court rejected President Joe Biden’s first shot at a sweeping student debt forgiveness program, Trump cheered. Trying to wipe out about $430 billion owed by debtors was “very, very unfair to the millions and millions of people who paid off their debt through hard work” he told a crowd in New Jersey, adding that it was just “a way to buy votes.”

All in all, the Biden administration managed to pull it off $175 billion in student loans through various programs. But several of his major initiatives aimed at further reducing America’s $1.7 trillion pile of education loans have stalled in the face of legal challenges or are still being written up by regulators, giving him ample room for Trump to try to deconsolidate them if he chooses. .

Based on a review of Trump’s website and platform, as well as conversations with lawyers, it does not appear that Trump’s campaign has released specific proposals on student debt, although he has called for eliminating the Department of Education. A campaign spokesman did not respond to a request for comment about the incoming administration’s plans.

Here’s what debt cancellation initiatives remain in limbo — and what could change.

Read more: Do I qualify for student loan forgiveness?

Biden’s Plan B

The Biden administration’s second attempt to create widespread student loan forgiveness — nicknamed “Plan B” — appears to be in jeopardy. In April, The Department of Education has proposed new rules that would allow him to write off debt for about 30 million Americans, including former students who owed more than their original principal or had been paying off their balances for more than 20 years.

That plan was stuck repeatedly to enter into force due to a process by the general prosecutors of the republican state. Trump’s Department of Education could give up for good, simply by refusing to finalize the program’s rules because they were never officially finalized. The same is true of a preliminary proposal the Biden administration presented last month that would have allowed pay off debts for borrowers facing financial difficulties.

SAVE

The Biden administration’s generous loan repayment plan, known as SAVE, could also be on the sidelines. The the program would reduce monthly payments on license loans to just 5% of a borrower’s discretionary income, down from 10% currently, while accelerating the path to forgiveness. But the scheme was tied to another lawsuit brought by GOP-led states, and Trump could theoretically choose not to defend the case. His administration could also use a formal rulemaking to replace the program entirely, though that would likely be a long and drawn-out process.

Meanwhile, there are 8 million borrowers enrolled in SAVE, who currently have their loans on hold, interest-free, until spring. Trump’s team will have to decide whether to force these individuals to start paying again.

Borrower’s defense

It’s a similar story to the borrower defense rule, which allows former students to seek debt relief if they were defrauded by their college while putting the school on the hook for the costs.

Trump’s first-term education secretary, Betsy DeVos, significantly narrowed the rule, with critics claim that the changes blocked “virtually all avenues for individual borrowers” to actually use it. The Biden administration rewrote the rule again in 2022 to make it easier to qualify, but that effort too was blocked by processes. In its Project 2025 agenda, the conservative Heritage Foundation urged the next Republican administration to scrap the new version.

Public service loan forgiveness

One of the Education Department’s major priorities during the Biden years was making it easier for borrowers to take advantage of the Public service loan forgivenesswhich cancels the debt of people who make 10 years of payments while working in government or for a nonprofit organization.

The program had a 99% rejection rate. when borrowers first started applying for relief under the Trump administration. This was largely due to its complicated rules that deterred many former students, such as strict requirements about what types of payments did or did not count toward forgiveness. The Biden administration began relaxing those rules starting in 2021, and so far it has been approved debts of 73.7 billion dollars although the program.

How Trump will handle PSLF going forward is unclear. His last administration repeatedly called on Congress to eliminate the program.

“It is not necessary to stimulate one type of work and one type of work at the expense of another”, DeVos told lawmakers in 2020. Such a dramatic move would still require an act of Congress, but in the short term, the new administration could still make administrative or bureaucratic changes, making qualification more difficult. The authors of Project 2025 argued that if Trump’s team could not terminate the PSLF, they should The Biden administration rules program expansion.

Jordan Weissmann is a senior reporter at Yahoo Finance.

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