What-to-expect-for-millions-of-student-loan-borrowers-kicked-off.jpeg

What to expect for millions of student-loan borrowers kicked off Biden’s key repayment plan

by with No Comment Xpandfy

The student-loan repayment roller coaster keeps rolling.

Over 7 million borrowers who were enrolled in former President Joe Biden’s SAVE student-loan repayment plan will soon have to transfer to a new plan after a court approved President Donald Trump’s legal settlement to eliminate SAVE.

While the Department of Education has not yet released its guidance on next steps for SAVE borrowers, the transition is set to be a major operational task for federal student-loan servicers. That could be a problem given diminished servicer oversight, a recent report from the Government Accountability Office said.

In addition to the lack of oversight, the Department of Education announced on March 19 that it would begin moving defaulted student-loan borrowers’ accounts to the Treasury Department in a new partnership — part of the Trump administration’s broader goal to dismantle the Department of Education. Borrower advocates said the move could put millions of accounts at risk of payment errors.

The GAO’s report, released in early March, found that the department’s Federal Student Aid office stopped assessing the five major federal student-loan servicers on accuracy and call quality in February 2025. The lack of oversight leaves FSA without assurance that servicers are billing borrowers correctly and providing them with accurate information.

“FSA is missing opportunities to ensure that servicers are providing borrowers complete and accurate information as it implements major statutory changes to student loan repayment options affecting millions of borrowers,” the report said. Advocates pointed to the elimination of SAVE as a reason the discontinued oversight could harm borrowers.

Aissa Canchola Bañez, policy director at advocacy group Protect Borrowers, said in a statement that the GAO’s report “could not come at a worse time, as millions of SAVE borrowers will be forced out of their repayment plan and have no other choice but to rely on their servicer to maintain access to an affordable repayment option.”

The SAVE plan, introduced by Biden in 2023, intended to give borrowers cheaper monthly payments with a shorter timeline to debt relief. It’s been blocked since the summer of 2024 due to litigation. While Trump’s “big beautiful” spending legislation planned to phase out SAVE by 2028, the approved settlement eliminates it ahead of schedule.

It’s not only SAVE borrowers — federal servicers will have to oversee the creation of new repayment plans from Trump’s spending bill. It includes a standard repayment plan and a new Repayment Assistance Plan, which would allow for forgiveness after 30 years of payments. Rep. Bobby Scott, top Democrat on the House education committee, said in a statement that the GAO report should serve as a “flashing red warning sign about what is to come” as the administration implements the federal repayment overhaul with diminished servicer oversight.

Richard Lucas, acting chief operating officer of FSA, said that the agency has other metrics it uses to evaluate servicer performance, including through surveys that “score the servicers’ performance across five measures each for borrower communications, contact center, and website support, as well as six measures for the servicers’ management of loans.”

It’s unclear how soon SAVE borrowers will be required to transition to a new plan and likely face higher monthly payments. The settlement said that the Department of Education would not enroll any new borrowers in SAVE and would deny all pending applications while it moves forward with the repayment changes.

Have a story to share? Contact this reporter at asheffey@businessinsider.com.




Source link

Ayelet Sheffey

Trump’s attempt to quickly axe a key affordable student-loan repayment plan gets shut down in court

by with No Comment Xpandfy

Student-loan borrowers might not lose a key affordable repayment plan just yet.

On Friday, a court dismissed a proposed settlement announced by the Department of Education and the state of Missouri in December that would have eliminated the SAVE income-driven repayment plan ahead of schedule.

President Donald Trump’s “big beautiful” spending legislation called for phasing out SAVE by 2028. This latest update means that the department has to stick with that timeline, and it cannot eliminate the plan before 2028 without court approval or a lengthy negotiated rulemaking process.

John Ross, Missouri’s district court judge, wrote in his ruling that the settlement was not presented to the court, and that federal law allows courts to “exercise jurisdiction only over cases or controversies,” which he said does not exist in this case because both the Department of Education and Missouri have agreed on the outcome they’re seeking without debate.

“It appears that there is no longer a live case or controversy sufficient to authorize the Court to enter a judgment on the merits,” Ross wrote.

The SAVE plan was created by former President Joe Biden in 2023, and it intended to give borrowers cheaper monthly payments with a shorter timeline to loan forgiveness. The plan has been halted since 2024 due to lawsuits seeking to block it, and while Trump’s “big beautiful” spending legislation included a provision to eliminate SAVE over the next few years, the settlement would have done so much sooner than anticipated.

Ross also wrote in a footnote that it’s “not lost on the Court that millions of borrowers who enrolled in the SAVE plan have patiently awaited clarity while this litigation has proceeded. However, that clarity must come from the Department of Education, and not from this Court, which is no longer empowered to weigh the merits of a case that is now moot.”

Winston Berkman-Breen, legal director at advocacy group Protect Borrowers, said in a statement that the court’s ruling means the department can now move forward with relief under the SAVE plan.

“As of today, not only is there no legal barrier to delivering those rights through the SAVE plan, but the Secretary has a legal obligation to do so,” Berkman-Breen said. “The U.S. Department of Education must immediately identify borrowers who are eligible to have their loans cancelled under SAVE and instruct their student loan servicers to cancel those loans.”

A Department of Education spokesperson told Business Insider that the department is evaluating the court’s decision.

The department said in December that, should the settlement be approved, it would not enroll any new borrowers in the SAVE plan, it would deny pending applications, and move the 7 million enrolled borrowers to other repayment plans. Those borrowers would have a limited time to prepare to make their payments.

Have a story to share? Contact this reporter at asheffey@businessinsider.com.




Source link

Ayelet Sheffey

Trump’s sweeping student-loan repayment overhaul goes into effect in the new year. Here’s what’s changing.

by with No Comment Xpandfy

The new year is bringing a host of new changes for millions of student-loan borrowers.

Beginning in July 2026, the student-loan provisions signed into law in President Donald Trump’s “big beautiful” spending legislation are set to begin taking effect. Those provisions include rolling out new student-loan repayment plans, new borrowing caps, and eliminating existing income-driven repayment plans, which could result in higher monthly payments for borrowers.

Here’s what the Trump administration has in store for student-loan repayment in 2026.

New student-loan repayment plans

Beginning in July, the Department of Education plans to begin its process of eliminating existing income-driven repayment plans and replacing them with two options: a standard repayment plan and a new Repayment Assistance Plan.

The standard repayment plan would set fixed payments for borrowers over a 10 to 25-year period based on the borrower’s original balance. The Repayment Assistance Plan would serve as the income-based option for borrowers; it would set payments at 1% to 10% of the borrower’s income, with a minimum monthly payment of $10 and forgiveness after 30 years.

It’s less generous than the existing income-based repayment plan, which forgives balances after 20 or 25 years, and former President Joe Biden’s SAVE plan, which would forgive balances after as few as 10 years of payments.

Borrowers who took out loans before July 1, 2026, will have until 2028 to enroll in RAP before the other plans phase out. Borrowers who take out loans after July 1, 2026, will only have RAP and the standard repayment plan as available repayment options.

Borrowing caps for advanced degrees

In addition to new repayment plans, Trump’s spending legislation eliminated the Grad PLUS program, which allowed graduate and professional students to borrow up to the full cost of attendance for their programs.

It also implemented new borrowing caps for borrowers seeking advanced degrees. Graduate students would have a cap of $20,500 a year or $100,000 over a lifetime, and professional students would have a cap of $50,000 a year and $200,000 over a lifetime.

The Department of Education also proposed instituting a revised definition of a “professional” program, which included 10 programs that would qualify for the higher borrowing cap, including medicine, law, and dentistry. The new definition was a key point of contention with stakeholders who negotiated the terms with the department because the revised definition leaves out advanced programs like nursing, some of which have tuition that is above the proposed caps.

Eliminating the SAVE plan

Trump’s spending legislation included eliminating the SAVE plan as part of its phase-out of existing income-driven repayment plans by 2028. However, his administration announced a proposed settlement with the state of Missouri in December that would end the SAVE plan as soon as the court approves the settlement.

It means that the 7 million borrowers enrolled in SAVE would have a limited period of time to find a new repayment plan and restart their monthly payments at a higher amount. Additionally, the department said that it would deny pending applications to SAVE, which would include 450,000 borrowers who have expressed interest in enrolling in the plan.

Expanding eligibility for income-based repayment

The Department of Education is expanding eligibility for income-based repayment plans by removing the requirement of partial financial hardship. Prior to Trump’s spending legislation, borrowers seeking to enroll in an IBR plan were required to have a monthly payment based on their income that was less than the amount needed to pay off their full balance over 10 years.

Removing that requirement, which the department said would be completed in December 2025, means that borrowers with higher incomes would be eligible to enroll in IBR. Additionally, the department said that servicers would hold IBR applications that would otherwise be denied, and the applications would be processed once the updates to IBR were completed.




Source link