Among many other questions inspired by the rapid fire actions of President Donald Trump’s final term, many Americans are asking What’s going on with student loans??
During his tenure, former president Joe Biden launched several plans for broad and targeted student loan relief, inviting critique and legal challenges from Republican-led states and organizations. Biden’s first attempt at forgiveness for low-income borrowers was stopped in court, and his second attempt at broad forgiveness was held up and has been abandoned by the new administration.
Biden’s seemingly successful relief action, the implementation of the Saving on a Valuable Education (SAVE) plan for lower-cost income-driven repayment, has been tied up in courts since last fall. Around 8 million borrowers were able to qualify for the plan before it was put on hold. That leaves our loans — and our financial plans — in limbo until the courts and the Department of Education (ED) decide exactly what we owe.
Recent headlines about student loan court cases and actions against the Department of Education, jumbled among the administration’s other actions, make it tough for borrowers to parse exactly how student loan debt will impact our finances going forward.
While some big questions are still unanswered, here’s an overview of the state of federal student loan repayment right now.
Make money easier. Sign up for The SS’s newsletter today.
Income-Driven Repayment Plans Are Still in Effect
Some folks mistakenly believe income-driven repayment (IDR) has been eliminated, but it hasn’t. Plans changed when the Biden administration enacted the SAVE plan, and some elements of these plans are in dispute. But if your loans are already in one of these income-driven repayment plans, it’s still valid:
- Pay As You Earn (PAYE)
- Income-Contingent Repayment (ICR)
- Income-Based Repayment (IBR)
- Saving on a Valuable Education (SAVE)
What’s new:
- SAVE court action: The SAVE plan is being challenged in court and is effectively on hold until decisions are made. While it’s on hold, loans already in SAVE are in an interest-free forbearance — you don’t owe a monthly payment, and your loans don’t accrue interest.
- No new IDR applications: The IDR online application is unavailable, so borrowers can’t apply for a new IDR plan at this time.
- IDR forgiveness is on hold: A court order in February prevents ED from granting forgiveness after the 20- or 25-year period stipulated under SAVE, PAYE or ICR. You’ll be moved into interest-free forbearance if you reach the forgiveness milestone for those plans during this hold. (IBR was created by a separate act of Congress that’s unaffected by the court order, and forgiveness is still being processed for that plan.)
More From The SS: Get Your Finances Together This Year With One of Our Favorite Budgeting Apps
Not Sure What’s Going on With Student Loans? Make Easy Money in the Meantime
You may not know where you stand with student loans right now. It’s scary to not know what’s happening, but if you’re looking for ways to make extra money in the meantime, we can help. These are some of our favorite ways to make quick cash.
Public Service Loan Forgiveness Is (Technically) Untouched
Public Service Loan Forgiveness, the relief program for teachers, nurses and other government or nonprofit workers, has been a target for reform by Republicans in Congress. But they haven’t made a move on the program yet.
You can still apply for PSLF once you’ve made 120 qualifying payments (10 years of repayment). Even though your loans must be in an IDR plan to qualify for PSLF, this program is unaffected by the court order blocking forgiveness for IDR plans, because “forgiveness” is explicitly laid out in the law that created it.
Drowning in Expenses?
Maybe you’re scrambling after your car broke down. Or you got a medical bill you weren’t expecting. Or inflation has finally pushed your budget over the edge. Take a breath. You don’t need to go it alone.
When money is tight, these resources can help you manage unexpected expenses without stress.
What’s new:
- Loans in SAVE could be in limbo: Months spent in forbearance don’t count toward your 120 payments. If you’re due to be eligible for forgiveness in the next few months and your loans are in forbearance under SAVE or for any other reason, consider moving to another payment plan to continue your progress. Considering IDR applications are unavailable, you’ll have to speak with your loan servicer about your options.
- PSLF buyback: If you’ve reached 120 months of qualifying employment but your loans were in forbearance or deferment for any of that time because of the pandemic pause or court orders, you can “buy back” credit by paying what you would have owed during those months, so you can apply for forgiveness. If your payments would have been $0 during those months, you can still apply for the buyback program to be moved toward forgiveness.
- Customer service might be hard to come by: The first borrowers became eligible for forgiveness under PSLF during Trump’s first term, and we can extrapolate from that experience that administration of this program is likely to be haphazard. Less than 2% of applicants were approved for forgiveness under Trump. The program was overhauled in 2021, and the Biden administration granted forgiveness to more than 1 million borrowers. Keep your own clear records of eligible employment and payments, and prepare financially to continue payments in case forgiveness takes longer than expected.
More From The SS: What is Debt Consolidation — And Should I Consider It?
The Department of Education Is Intact but Hindered
Trump’s executive order:
On March 20, Trump signed an executive order instructing the Education Secretary “to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education.”
Neither the president nor anyone in the administration has the legal authority to eliminate the Education Department, because the agency was created by an act of Congress. The Associated Press reported that Republican lawmakers said they’ll introduce legislation to close the department, while Democrats promise to oppose it.
A statement from Secretary of Education Linda McMahon suggested ED will continue to support student loan programs, saying the department “will continue to support K-12 students, students with special needs, college student borrowers, and others who rely on essential programs.”
However, the order itself said the Education Department “must return bank functions to an entity equipped to serve America’s students.” The order is otherwise brief and doesn’t include any details on how McMahon might legally facilitate the closure of the department outside of an act of Congress.
What changes might actually come for student loans is unclear at this point. ED, in fact, doesn’t operate like a bank, as the order suggests. Student loans are managed by servicers dedicated to that purpose that coordinate with the department.
More From The SS: Smarten Up, Americans. No Offense But Millions of Us Haven’t Used These Money Secrets
Layoffs at ED:
Prior to the recent executive order, on March 11, ED announced a “reduction in force” that placed nearly half of the department’s employees on administrative leave beginning March 21 and immediately removed them from their offices due to an alleged security concern.
The announcement of these layoffs was quickly met with a lawsuit against McMahon, which awaits a court date. For context, several other actions by this administration are being challenged in court. Dozens have been blocked by federal courts, including some of those involving mass firings at government agencies. Those cases may be appealed to the U.S. Supreme Court, which recently ruled against Trump’s dismantling of USAID, the first of the cases it’s heard on the administration.
Student loan experts have expressed concern about the department’s ability to continue to process loan, repayment plan and forgiveness applications with a hobbled workforce. You’ll still rely primarily on your servicer for any questions, but you can likely expect delays and confusion as those remaining at the agency attempt to handle the job.
More From The SS: Is InboxDollars A Legitimate Way To Make Money in 2025?
We Dare You to Take Control of Your Debt
Up for a debt challenge?
In 10 days, these 10 practical steps could help you get back on the right financial track.
Student Loan Delinquencies Are Hitting Credit Scores (Hard)
Some federal student loan borrowers have seen their credit scores unexpectedly plummet since Feb. 1.
Newsweek reported last month on several borrowers whose credit scores had dropped by up to 200 points because of reported activity on student loan accounts. Credit scores are suddenly taking a hit because Feb. 1 likely marked the first day servicers started reporting missed payments since payments were paused due to the pandemic in March of 2020.
That pause ended in October of 2023, but ED under Biden implemented a 12-month “on-ramp” period in which payments were due, but missed payments wouldn’t carry the usual consequences — including credit reporting. That on-ramp period ended on September 30 of last year, so servicers started tallying missed payments as usual. After 90 days, loans are considered delinquent, and servicers can report that to credit bureaus. That 90-day period would have hit at the end of January.
More From The SS: The 28 Best Side Hustles: Our Top Picks to Help You Make More Money
Steps to take
If you’re worried about the impact of student loan payments on your credit score, here’s what you can do:
- Check your credit score through an app like Credit Sesame or Credit Karma to see if a student loan delinquency has been reported.
- Check your account with your student loan servicer for the status of your loans. You can find out which company services your loans here.
- If your loans are delinquent or in default, work with your servicer on a plan to get them current. You can usually get loans out of default with a monthly payment that’s much lower than your current payment plan.
Where to Find Help with Student Loans
We’re still waiting for final information on the fate of SAVE plans, forgiveness under IDR, how PSLF will shake out during this term and whether various actions against ED will stand up in court.
In the meantime, keep an eye on the monthly payments you owe. Contact your servicer if you have any questions about your repayment plan or status. Log into your account with your servicer, and make sure your contact information (especially your email address) is up to date — this is the best way to get updates on any actions that impact the status of your loans.
For the latest updates on SAVE actions, check studentaid.gov/saveaction.
For help with applying for and repaying student loans, get free advice and guidance from experts at EdVisors or The Institute of Student Loan Advisors.
More From The SS:
Need a Hand With Bills?
Listen, we know it’s tough out there. But there’s no shame in asking for help.
These companies make it easy to help yourself and your bank account.
Dana Miranda is a Certified Educator in Personal Finance and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about money for misfits.
