MW Trump inherits a $1.6 trillion student-loan crisis. What he does next will impact millions of borrowers.
By Jillian Berman
As Donald Trump takes the oath of office, student-loan borrowers face uncertainty about the future of their debt
Craig Greenberg has been paying his student loans for decades, but it's only the past few years that he started paying very close attention to them.
He began monitoring his student-loan portal and checking student-loan forums on Reddit (RDDT) regularly in 2022. In April of that year, the Biden administration announced it would begin adjusting borrowers' accounts so that more of their monthly payments would count toward forgiveness under plans that offered relief after at least 20 years.
Earlier this week, with just days to go before Joe Biden left the presidency, Greenberg, 51, logged onto his account and saw he had the 300 payments necessary to meet the threshold for cancellation. Still, he was unsure about whether the debt relief would ultimately go through.
"I was very happy to see that they finally got around to making the adjustment, but I obviously had the concern still without the forgiveness having gone through and the new administration coming in," he said.
"There are a lot of question marks out there, but at the very least the system is showing that I've met the terms," he added.
As Donald Trump takes the oath of office for the second time Monday, there are likely thousands in Greenberg's position. The Biden administration approved cancellation for more than 5 million borrowers, ramping up the pace in the week leading up to when he left office. These borrowers were eligible for some form of debt relief that was on the books before Biden became president, but his administration worked to smooth the pathways toward cancellation.
Those efforts were part of a broader Biden-era initiative to reform the student-loan system, much of which won't come to fruition. While millions of borrowers are now free of their loans, the fact that some who were promised relief are still waiting, while other borrowers are watching the courts to see how much they'll pay each month, signals just how messy the student-loan system still is.
Trump will now inherit this program with more than 42 million borrowers and $1.6 trillion in loans. He hasn't said much about how he would approach the student-loan problem, but his allies have signaled an interest in getting rid of the U.S. Education Department, curtailing forgiveness options, privatizing the student-loan system and more. After four years of changes, student-loan borrowers are once again bracing for uncertainty.
"The Republicans in Congress and the incoming Trump administration have been clear that they intend to make some pretty significant changes on student loans," especially around repayment and debt cancellation, said Clare McCann, managing director of policy and operations at the Postsecondary Equity & Economics Research Center. "There are a handful of pieces that are much more up in the air about what it will look like."
Relief for scammed students is under threat
One of the programs that advocates and borrowers are paying close attention to is borrower defense, a provision that allows borrowers who were scammed by their schools to have their federal student loans cancelled. Borrower defense has been on the books since the 1990s but wasn't widely used until 2015, when borrowers organized by activists began clamoring for relief under the law.
Heather Yearnack started advocating with other borrowers for the government to recognize their plight around that time. Yearnack attended the Phoenix campus of Corinthian Colleges, a for-profit college chain that collapsed in 2015 amid allegations of fraud from state law-enforcement officials and federal regulators.
Yearnack, 36, earned a paralegal associate's degree from the school in 2008. But when she enrolled at her local community college in 2013, basically none of her coursework transferred.
"I had to start over completely," she said. It was "as if I had never been to college." Still, Yearnack made monthly payments on her loans, even when it was a struggle on a $14- to $17-an-hour salary.
In 2022, she received word from the Biden administration that her loans would be cancelled. Now, nearly three years later, the debt still hasn't been wiped away. Just days before Trump's inauguration, Yearnack said she was frustrated and nervous. She's also expecting a refund of some of the money she paid toward the loans - funds she could use to pay for a surgery she needs and to put toward a wedding for her and her partner, who have been together for five years.
"I'm trying to move on with my life and I feel like I deserve that money back," she said. "I was told that money was going to come back to me. The government approved it, the president approved it, and here we are waiting and nobody has a timeline."
Trump hasn't said much about how he'll approach the borrower-defense program. During his first term, then-Education Secretary Betsy DeVos stalled on reviewing claims and severely limited the amount of relief that went to borrowers who already had claims approved. In addition, congressional Republicans have set their sights on curtailing the program as part of an effort to pay for tax cuts.
Meanwhile, the Supreme Court said it would review a Biden administration objection to a lower-court ruling that, if implemented, would severely limit the number of borrowers eligible for relief under the law.
"There's a feeling that there's uncertainty on every side," said Eileen Connor, the executive director of the Project on Predatory Student Lending, referring to the various branches of government.
"It's so draconian," Connor said of proposals to limit or repeal borrower defense. "It would put student-loan borrowers in a worse place than any other kind of borrower, and it's such an odd thing to do in the context of a lending program that is both meant to facilitate an educated workforce and populace, but also where the loans are the device of access that we've settled on."
Changes to repayment plans
Congressional Republicans and other Trump administration allies have also vowed to reform student-loan repayment. Right now, borrowers have a suite of options to choose from called income-driven repayment, which allows them to repay their debt as a percentage of their income and have the remainder cancelled after 20 or 25 years of payments.
In a bill introduced last year, Rep. Virginia Foxx, a North Carolina Republican and the outgoing chair of the House Committee on Education and Workforce, put forward an income-driven plan that eliminated the option for cancellation after a certain number of years. Meanwhile, federal courts are weighing legal challenges to the SAVE plan, the repayment program the Biden administration launched in 2023.
It's possible the courts could rule in a way that limits the Education Department's options when it comes to income-driven repayment, McCann said.
"Whatever comes out of the court case could reshape it in a different direction," she said of income-driven repayment, "and potentially in a direction that's further than either Republicans or Democrats would like to go."
Other forms of debt cancellation could also be under threat. Republicans have attacked the Public Service Loan Forgiveness program and even tried to prevent future administrations from taking broad swings at debt relief like the Biden administration did.
Even if officials don't try to get rid of these programs affirmatively, if they aren't focused on helping borrowers navigate them, then borrowers could struggle to receive relief, said Abby Shafroth, the director of the Student Loan Borrower Assistance Project at the National Consumer Law Center.
"We know that Federal Student Aid and the contracted student-loan servicers are not incredibly fast in the best of times," she said. "And if there are threats to funding or stops put in place in terms of their work, I would worry about borrowers and their families being impacted."
Jason Evey knows about these challenges firsthand. He's been working with his wife, a public-school teacher, to get an accurate count of the payments she's made toward Public Service Loan Forgiveness. Under the initiative, borrowers working for the government or nonprofits can have their debt cancelled after 120 payments.
Though she's been with the same employer since 2009, a roughly two-year period of her payments aren't being counted, putting her 11 payments short of what she needs for relief. The couple has been bounced back and forth between the Education Department and their servicer, sharing their copious documentation several times. They even got their congressman's office involved - all to no avail.
"If they get rid of the Education Department, I don't know what that would mean for all of this," Evey said, referring to comments by Trump and allies about gutting the agency. "In my opinion, it couldn't get any worse than how it's run now."
Borrowers advised to preserve documentation
Regardless of whatever comes next, Shafroth and others are advising borrowers to preserve any documentation they've received about a discharge. They're also saying borrowers should screenshot the count of monthly payments toward forgiveness that started appearing on borrowers' student-loan portals this week.
Greenberg is doing all of that and hoping for the best. His experience of being in the student-loan system for 25 years has left him feeling that "in general, it obviously could be handled a lot better than it has been." The fact that he didn't know there was an option to have one's debt cancelled after 25 years of payments until the Biden administration flagged it a few years ago suggests that confusion abounds about the system.
If all goes according to plan, he'll have $40,000 wiped out after paying for years on loans he took out for college and law school. For now, he's waiting.
"I've kind of resigned myself to whatever happens, happens," he said. "I've done everything I could do."
(MORE TO FOLLOW) Dow Jones Newswires
January 20, 2025 09:31 ET (14:31 GMT)
Copyright (c) 2025 Dow Jones & Company, Inc.
Comments