Trump on Student Loans: What Borrowers Need to Know
Understand how Trump’s policies could impact student loan repayment, eligibility, and interest, and what borrowers should consider moving forward.
Donald Trump’s policies on student loans have been a topic of debate, with potential changes affecting millions of borrowers. His past actions and current proposals could impact repayment plans, interest rates, and loan forgiveness options. Understanding these possible shifts is important for anyone managing federal student debt.
Federal Loan Repayment Requirements
Federal student loan repayment is governed by statutory guidelines and administrative policies. Borrowers must begin payments after a six-month grace period following graduation, withdrawal, or a drop below half-time enrollment. The standard repayment term is 10 years, though extended options exist.
Trump previously proposed replacing multiple income-driven plans with a single option featuring a 30-year repayment term for those using income-driven repayment. This would extend repayment for many borrowers, increasing total interest costs. Currently, forgiveness is available after 20 or 25 years, depending on the plan.
Federal loans become delinquent after one missed payment and enter default after 270 days of nonpayment, leading to wage garnishment, tax refund seizures, and credit damage. Trump has not proposed changes to default policies, but restructuring repayment plans could affect how defaults are handled.
Income Thresholds and Repayment Plans
Income-driven repayment (IDR) plans adjust monthly payments based on earnings and family size, capping payments at a percentage of discretionary income. Current plans set payments between 5% and 20% of discretionary income.
Trump proposed consolidating IDR options into a single plan with payments set at 12.5% of discretionary income. This would raise payments for borrowers on Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE), which cap payments at 10%, but lower them for those on the Income-Contingent Repayment (ICR) plan, which requires 20%.
Eligibility for IDR plans depends on income relative to debt. Borrowers with lower earnings may qualify for reduced or $0 payments. The federal poverty guideline multiplier, currently 225% for the SAVE plan, determines how much income is shielded from payment calculations. Trump has not specified whether he would maintain or change this threshold, but any adjustment would impact affordability for lower-income borrowers.
Loan forgiveness under IDR plans depends on repayment length. Current rules allow forgiveness after 20 or 25 years, depending on the plan and whether the borrower has undergraduate or graduate debt. Trump proposed a 30-year term for graduate borrowers, increasing total interest costs, while undergraduate borrowers would see forgiveness after 15 years. The higher payment percentage could offset the benefit of a shorter timeline.
Loan Servicer Adjustments
Federal student loans are managed by loan servicers—private companies contracted by the Department of Education to collect payments and assist borrowers. Changes in servicer contracts or policies can affect customer service quality and payment processing.
During Trump’s administration, there were discussions about centralizing loan servicing under a single platform to simplify borrower interactions, though this was not fully implemented. Future changes could alter how servicers operate, potentially affecting response times and error resolution.
Borrowers have reported issues with servicers providing inconsistent guidance, misapplying payments, and delaying income-driven repayment applications. A single servicer model could standardize procedures but might also reduce competition, which some argue helps maintain service quality.
Servicer transitions have caused administrative errors, such as missing payment histories or incorrect balances. If Trump pursues further consolidation or contract renegotiations, ensuring a smooth transfer of borrower accounts would be necessary to prevent disruptions.
Loan Discharge Eligibility
Federal student loan discharge applies in cases where borrowers can no longer be held responsible for repayment due to specific circumstances. One primary pathway is total and permanent disability (TPD) discharge, which requires medical documentation proving an inability to engage in substantial gainful activity. The Department of Education verifies eligibility using Social Security Administration records or a physician’s certification.
Borrowers defrauded by their schools may qualify for relief under borrower defense to repayment regulations, which allow loan cancellation if institutions engaged in deceptive practices. Closed school discharge applies when an institution shuts down before a student can complete their program, often granting full cancellation without requiring proof of misconduct.
Interest Accrual Rules
Interest accrual on federal student loans affects total repayment costs. Borrowers with subsidized loans do not accrue interest during deferment, while unsubsidized loans accumulate interest continuously. If unpaid, interest is capitalized—added to the principal balance—leading to higher future payments.
Trump previously proposed eliminating subsidized loans for new borrowers, which would increase costs for those relying on deferments. He also suggested simplifying interest structures, potentially replacing multiple rates with a single fixed rate. While no formal changes were enacted, future adjustments could alter how interest accumulates, particularly for borrowers using income-driven repayment plans.
Refinancing and Consolidation
Borrowers managing student debt often consider refinancing or consolidation. Federal loan consolidation combines multiple loans into one with a weighted average interest rate, simplifying payments but not necessarily reducing costs. Refinancing, offered by private lenders, can lower interest rates but requires giving up federal protections like income-driven repayment and loan forgiveness programs.
Trump has not focused heavily on refinancing, but any changes to federal loan structures could influence borrower decisions. If federal interest rates were adjusted or repayment plans restructured, refinancing might become more or less attractive depending on private lender terms. Changes to federal consolidation policies could also affect how interest rates are calculated or repayment terms structured.