The Impact of Trump's Policies on Student Loans

The Trump administration's approach to student loans has had a significant impact on borrowers, institutions, and the overall economy. This article examines the changes implemented, the resulting consequences, and the challenges borrowers face navigating the complex landscape of student loan repayment.

Rising Delinquency and Default Rates

New analysis reveals that the Trump administration's actions triggered a nationwide student loan delinquency and default crisis. During the first year of the Trump administration, the student loan delinquency rate rose significantly, impacting millions of borrowers. Nearly 9 million student loan borrowers-or, one out of every five-entered default, which puts them at risk of eventually having their wages and tax refunds garnished. A staggering number of student loans are in delinquency, now reaching 25 percent of all those with payments due. This is nearly three times the delinquency rate before the pandemic.

Over the first three quarters of 2025, borrowers with delinquent student loans saw their credit scores decrease significantly, plunging a large percentage of them into “deep subprime” territory. As a result of negative credit impacts, those borrowers will struggle more to access credit and face new hurdles in securing housing and employment.

Actions Contributing to the Crisis

Much of the rise in delinquencies can be linked to the Trump administration’s actions aimed at increasing student loan payments. The Department of Education blocked large numbers of borrowers from enrolling in income-driven repayment (IDR) plans for nearly all of last year. Even after that three-month period, the Department of Education and the servicers it oversees continued failing to approve applications. These actions over the course of the past year have functioned as a kind of a blockade around struggling student loan borrowers, preventing them from getting relief and choking off the help that IDR plans would have provided.

As borrowers struggle, they have had fewer civil servants to turn to for help, as the Trump administration has decimated the staffing levels at the Department of Education. Over 2025, the Office of Federal Student Aid, which has primary responsibility for overseeing the servicers who handle student loan repayment, lost a significant percentage of employees. Meanwhile, by gutting the independent Consumer Financial Protection Bureau (CFPB), the administration has taken the government’s main student loan watchdog off the board, reducing scrutiny of whether servicers are fulfilling their obligations to students. These decisions have real consequences for borrowers’ ability to get help.

Disproportionate Impact on Vulnerable Groups

Delinquency rates are higher for Black and Native American borrowers, reaching nearly 50 percent for these groups. Delinquency rates are higher for those from lower-income backgrounds. By sinking credit scores, student loan delinquencies have major ramifications for borrowers’ ability to participate fully in the economy.

Consequences of Delinquency

A student loan delinquency can wreak financial havoc on borrowers and their families. Borrowers can rapidly lose access to all kinds of credit or loans, and with them, access to housing, transportation, and the ability to cover basic necessities like groceries, rent, or medical bills. This damage will not be reversed as quickly as it occurred: it takes years to rehabilitate a credit score after a delinquency is added to it. They are very likely to lose access to thirty-year conventional mortgages.

Income-Driven Repayment (IDR) Plans

Congress did not intend for student loans to break a family’s financial future. By design, they entitle most borrowers to a safety net, a set of programs known as income-driven repayment (IDR) plans. These plans reduce payments for those with low incomes, helping borrowers dodge delinquency and default.

Borrowers on income-driven repayment plans will have the same options available for two more years. Borrowers on other existing income-driven repayment plans will need to choose between IBR and RAP (or a standard plan).

Changes to Repayment Plans

Major changes to student loan borrowing and repayment are coming. Eventually, the changes will streamline the system and reduce the number of repayment options. Regardless of what plan you're on, your current loans will remain exactly the same for the next two years, as long as you don't take out new loans or consolidate the ones you have.

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The proposed rule would also introduce new annual caps on federal loans for graduate students, distinguishing between professional and nonprofessional graduate programs. Another aim is to simplify the federal student loan repayment system. Borrowers will now choose between a new tiered standard repayment plan and an income-based plan.

The SAVE Plan and Legal Challenges

In 2024, Republican attorneys general sued to stop the enactment of President Biden’s Saving on a Valuable Education (SAVE) Plan, the most affordable and borrower-friendly IDR plan in history. The Republican budget reconciliation law, signed into law by President Trump in July, repealed the SAVE Plan to pay for tax cuts that primarily benefit the ultra-wealthy. Those borrowers will now have to make monthly payments years before the law would have previously required.

If the 6.7 million borrowers leaving the SAVE forbearance fall delinquent at the same 25 percent rate as the general population, a significant number of more borrowers will fall delinquent.

Public Service Loan Forgiveness (PSLF)

In June/July 2025, the Education Department held a rulemaking session to consider new regulations that would restrict which employers qualify for the PSLF program. On August 18, 2025, the Education Department published draft rules for public comment.

As President of the United States, I have a duty to protect, preserve, and defend the Constitution and our national security, which includes ending the subsidization of illegal activities, including illegal immigration, human smuggling, child trafficking, pervasive damage to public property, and disruption of the public order, which threaten the security and stability of the United States. Accordingly, it is the policy of my Administration that individuals employed by organizations whose activities have a substantial illegal purpose shall not be eligible for public service loan forgiveness.

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Institutional Accountability

The Education Department says the latest batch of nonrepayment data serves as an “early indicator” of what institutions could be at risk of failing a related accountability measure based on the percentage of borrowers who default on their loans. An institution’s nonpayment rate is not the same as their CDR; the nonpayment rate includes any student who hasn’t paid their loans within 90 days, while the CDR includes only those who have defaulted, which happens after 270 days of missed payments.

Resources for Borrowers

Beyond the Department of Education, there are organizations where borrowers can find help. At least two states, New York and California, have invested in one-on-one student loan counseling.

If you need individualized advice about your student loans, please contact your loan servicer. You can compare current plan options and apply for a plan.

Navigating the Complex System

Given the ever-changing landscape of student loan policies, it is crucial for borrowers to stay informed and proactive. Borrowers should reevaluate their student loan strategy every year at tax time, because things change.

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