Things are going to change a lot for student loans in 2025. The Biden administration is leaving the White House so that President-elect Trump can start his second, non-consecutive term. This has left many current and former students wondering what will happen next with student loan payment plans and loan forgiveness.
Biden administration forgave $180 billion worth of student loans
Biden forgiven more than $180 billion in student loan debt while he was president. It was the most debt that any president has ever forgiven, and it helped about five million Americans look forward to a future without debt.
The Biden administration also made changes to student loan program like the PSLF program that helped millions of borrowers shorten the time they had to pay back their loans and made it easier and faster to figure out when a student was no longer responsible for payments.
Biden also tried to give all 45 million people with student loans $100,000 to help them pay it off while he was president. But this plan was thrown out by the Supreme Court. Besides that, he tried to make debt relief available to more people than the current rules allow.
But a lot of students are worried about the progress made by the Biden administration and what the Trump administration might do to undo some of Biden’s plans.
Trump’s student loan forgiveness plan
If you are in President Biden’s Saving on a Valuable Education (SAVE) income-driven repayment plan, which started in late 2023 to lower monthly payments and speed up loan forgiveness, you will probably need to start looking for other payment plans now that Trump is in office. There were two lawsuits that stopped the plan from going forward.
This put borrowers in administrative forbearance while the courts decided if it was legal. Because the plan is linked to Biden and is being opposed by Republican-led states, President Trump probably will not defend it in court, and it is not clear when borrowers will have to start making payments again.
People who were in SAVE or looking for other ways to pay back their loans can now apply again for income-driven repayment plans that were supposed to end.
The Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans are available to people who want to borrow money. Both ICR and PAYE base payments on a percentage of your discretionary income, with a 20% cap for ICR and a 10% cap for PAYE.
On PAYE, payments are capped at what they would be on a normal 10-year plan. On the other hand, ICR payments could be higher. It is possible to get rid of your public service loans through both plans. Most importantly, if you want to get student loans for the first time this year, do not sign up for the SAVE plan. Instead, look at the ICR or PAYE options.
Student loans remain a persistent problem in the U.S.
There is still a problem with student loans in the U.S. It affects millions of people and makes the economy less stable overall. More than $1.7 trillion is still owed on student loans, making them one of the biggest sources of household debt in the country.
Due to the high cost of tuition and the lack of affordable financing options, many graduates are still paying off their debts years after they graduate.
Some people can not reach big goals in their lives like buying a house, starting a business, or saving for retirement because they have too much debt.
The Biden administration has done a great job of helping students get out of debt, but it is important to note that these plans do not always solve the real problem, which is that tuition costs are going up and graduates are not getting enough money.
As the amount of debt keeps rising, there is more and more pressure on policymakers to make big changes that will help borrowers and make the system more stable for future students.
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