15 Important Updates Following the Trump Administration’s New Policy On Student Loans
Student loan repayment is undergoing significant changes under the Trump administration. Starting with stricter eligibility criteria and then the elimination of certain forgiveness programs, these policy shifts could substantially impact your financial obligations. Read on to get information that will help you stay informed about your student loans.
New Income-Driven Repayment Plan Introduced
Trump’s administration is reshaping repayment plans by setting up a new model—RAP. Under this plan, borrowers could owe up to 10% of income for as long as 30 years. Gone is the income protection buffer that once helped reduce monthly costs for low and moderate-income earners.
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Elimination Of Broad Forgiveness Programs
The SAVE plan has been scrapped—the end of the most expansive forgiveness option. However, others, like Public Service Loan Forgiveness, still exist, just with tighter eligibility rules. Many borrowers will face extended repayment periods, changing both short-term expectations and the long-term cost of borrowing for education.
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Resumption Of Loan Collections
After a years-long freeze, collections on defaulted federal student loans have restarted. Millions of borrowers now face wage garnishments, tax refund seizures and credit damage. The safety net many relied on during hardship has vanished, and defaulting has real, immediate financial consequences once again.
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Changes To Public Service Loan Forgiveness (PSLF) Eligibility
PSLF just got harder to reach. A recent executive order now bars forgiveness if your employer’s mission includes “substantial illegal activity”—a loosely defined standard. Could your organization qualify? For many in healthcare or nonprofit law, the answer might be a sudden and expensive no.
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Cap On Graduate Student Loans
Future graduate students could face tighter borrowing limits. The latest proposal caps federal loans at $100,000 for most graduate degrees and $150,000 for professional programs like law or medicine while also ending Grad PLUS loans. That shift could restrict access for students without private financial backing.
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Removal Of Forbearance And Deferment Options
Starting with loans disbursed after July 1, 2026, economic hardship deferments will be eliminated, and forbearance will be capped at nine months within a 24-month window. These limitations mean future borrowers will face stricter rules when pausing payments, increasing pressure during periods of unemployment or financial distress.
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Increased Delinquency Rates
Serious delinquency among federal student loan borrowers rose sharply from under 1% to 7.7% in early 2025, according to the New York Fed. This spike reflects a notable quarterly shift as fewer income-driven options remain under Trump’s revised repayment strategy and expose borrowers to greater risk.
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Potential Loss Of Accreditation For Universities
A new executive order targets accreditation agencies and holds them accountable for overlooking unlawful practices, such as discrimination. If an accreditor is suspended, the universities it oversees risk losing federal aid. This leaves students to face mounting debt and degrees with reduced credibility in the job market.
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Transfer Of Loan Management To Small Business Administration
Trump’s proposal to shift student loan oversight to the SBA—part of dismantling the Department of Education—raised eyebrows. However, a federal judge blocked the plan on May 29, 2025, halting implementation. For now, your payments remain under the current federal systems, not small-business jurisdiction.
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Reduction In Available Repayment Options
Once, borrowers could choose from over ten different repayment paths. Soon, there might be just two. A flat-rate option and a revised income-based plan would replace the menu of flexibility with a binary choice. That could squeeze out those with nontraditional income patterns.
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Stricter Work Requirements For Loan Forgiveness
Concerns are growing over whether future student loan forgiveness will be more heavily tied to employment status. While no official rule disqualifies disabled borrowers or caregivers as of May 2025, advocacy groups warn that proposed changes could complicate access for non-working individuals who currently qualify through existing pathways.
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Impact On International Students
Revoked visas and tougher restrictions are pushing global talent away. Over 1,200 international students have already lost access to U.S. education in recent months. As foreign enrollment drops, universities could lose funding, and American students may feel the ripple effect in tuition increases.
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Legal Challenges To Policy Changes
Legal action is piling up against recent student loan policies. Lawsuits challenging both the Department of Education’s role and individual forgiveness limitations are creating confusion. Until the courts settle key questions, borrowers remain stuck in limbo—unsure how or even if their repayment plans still apply.
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Increased Financial Burden On Borrowers
Higher monthly payments are only the start. With fewer forgiveness options and longer repayment terms, many borrowers will end up repaying more over time. Even small increases add up—specifically for households already dealing with inflation or stagnant wages.
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Emphasis On Borrower Accountability
The administration wants borrowers to carry more of the load. Collections are back in full force, while fewer support resources remain. The idea of “accountability” has become a codeword for penalties, especially for borrowers who missed payments during economic downturns or periods of personal crisis.
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