Navigating Student Loan Policies Under the Trump Administration

The Trump administration's approach to student loan policies has been marked by significant shifts, impacting borrowers in various ways. This article delves into the key changes and their consequences, including the pause on debt collection, the introduction of the Repayment Assistance Plan (RAP), and the administration's handling of income-driven repayment plans.

Pause on Collection of Defaulted Federal Student Loan Debt

One of the initial actions of the Trump administration was to implement a pause on the collection of defaulted federal student loan debt. This included halting the Treasury Offset Program, which previously allowed the government to seize tax refunds to offset outstanding student loan debt.

Reversal of Course and Economic Implications

While the pause began as a temporary measure during the pandemic, it was later extended through bipartisan legislation and administrative action under the Biden administration. The Trump administration initially restarted the Treasury Offset Program in May 2025 and seemed poised to resume wage garnishments. However, a recent announcement reversed these decisions, reviving and extending the pandemic-era pause.

Critics of this move argue that it could lead to a substantial loss of revenue, potentially reaching $5 billion per year, and allow loan balances to grow unchecked. They contend that with the pandemic no longer an immediate crisis, there is no justification for emergency action on student debt. Concerns have also been raised that preventing debt collection undermines the financial stability of the student loan program, which is intended to help students access higher education, not to stimulate the economy or buy votes.

Calls for Congressional Action

Instead of administrative actions, some suggest that the Trump administration should collaborate with Congress to find responsible ways to reform the collection of defaulted loans. This would ensure a more sustainable path for the federal student loan program.

Read also: Impact of Trump on Student Debt

Introduction of the Repayment Assistance Plan (RAP)

A major shift in student loan policy came with the introduction of the Repayment Assistance Plan (RAP). This plan, enacted as part of a broader legislative package, restructures the federal student loan repayment system, particularly for new borrowers.

Streamlining Repayment Options

For loans taken out after July 1 of this year, borrowers will have only two repayment plans to choose from: a new standard plan and one income-driven repayment plan. Streamlining the repayment options may lead to less confusion among borrowers.

Key Features of RAP

RAP departs significantly from previous income-based repayment plans in several ways:

Gross Income vs. Discretionary Income: RAP bases a borrower’s payment on their gross income, rather than their discretionary income. This means that a borrower's payment is calculated from their total income without setting aside a portion for basic needs.
Elimination of Negative Amortization: One major change implemented with RAP is the elimination of negative amortization, preventing loan balances from growing when interest accumulates faster than monthly payments can cover.
Changing Percentage of Total Income: RAP will have borrowers pay a changing percentage of their total income as it increases.
Elimination of Balance Discharge: All prior income-based plans have featured this “light at the end of the tunnel” where any remaining balance is discharged after 10-25 years of payments, depending on the plan.

Concerns and Criticisms

RAP's design has raised several concerns:

Affordability: Critics argue that RAP's higher payments, especially for low-income borrowers, undermine the primary goal of income-based plans: to keep borrowers in good standing and avoid default.
Cliff Effect: RAP's structure could create a "cliff effect," where a small increase in income leads to a significant jump in monthly payments.
Lack of a Safety Net: Some argue that RAP is not much of a safety net.
Impact on Long-Term Borrowers: The plan's lack of balance discharge may negatively impact borrowers with persistently low incomes who did not complete a degree.

Impact on Specific Loan Types

The Trump administration's policies also affect specific types of student loans differently:

Read also: The Impact on Education

Parent PLUS Loans

Families already on income-driven repayment plans for Parent PLUS loans should consider splitting up future loans between parents for additional college-bound children.

According to government data, about 3.6 million people held Parent PLUS loans last year, totaling about $116 billion.

Graduate PLUS Loans

Graduate PLUS loans, which allowed students to take out the full cost of tuition regardless of the amount, will no longer be available. Students pursuing graduate degrees will have new annual loan limits of $20,500 and lifetime limits of $100,000. Nursing programs and public health programs are now considered not professional and so you can borrow half as much as you could for "professional" programs like law or medicine.

Some experts believe that students will seek private loans to fund education instead of universities dropping rates.

Rise in Delinquency and Default Rates

Analysis indicates that the Trump administration’s actions on student loans have triggered an unprecedented nationwide student loan delinquency and default crisis.

Delinquency Rates

During the first year of the Trump administration, the student loan delinquency rate rose from roughly zero to nearly 25 percent of borrowers delinquent. 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 (9.2 percent as of 2019). The Trump administration has needlessly added harmful roadblocks and barred access to programs that borrowers are entitled to under federal law and that help prevent borrowers from falling behind on their loans. 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.

Default Rates

Nearly 9 million student loan borrowers-or, one out of every five-are in default, which puts them at risk of eventually having their wages and tax refunds garnished.

Credit Score Impact

Over the first three quarters of 2025, borrowers with delinquent student loans have seen their credit scores decrease by 57 points on average, plunging three-quarters of them into “deep subprime” territory. The 2 million student loan borrowers who had a credit score that was near-prime or better in 2024, and whose loans became delinquent in 2025, saw their credit score decrease by 100 points on average, from 680 to 580, plunging them to the edge of deep subprime. As a result of negative credit impacts, those 2 million borrowers will struggle more to access credit, are projected to pay thousands of dollars more on auto loans and personal loans, and will face new hurdles in securing housing and employment. They are very likely to lose access to thirty-year conventional mortgages.

Factors Contributing to Delinquency

Much of the rise in delinquencies can be linked to the Trump administration’s actions aimed at increasing student loan payments.

Blockade Around Struggling Borrowers

The Department of Education blocked large numbers of borrowers from enrolling in 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.

Reduction in Support Services

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 653 employees, a nearly 42 percent decrease from FY 2024. 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.

Consequences of Default

When a borrower enters default, they have limited options and opportunities for exiting default and, as a result, remain there for a long time. Defaulted loans are at risk of forced collections, such as the garnishment of wages and offsetting of Social Security benefits and tax refunds.

Repeal of the SAVE Plan

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.

Resuming Wage Garnishments

December 23, 2025 | WASHINGTON, D.C. Department of Education (ED) plans to start garnishing wages from student loan borrowers in default.“At a time when families across the country are struggling with stagnant wages and an affordability crisis, this Administration’s decision to garnish wages from defaulted student loan borrowers is cruel, unnecessary, and irresponsible. Department of Education was unable to control this tool. Borrowers who receive a notice from ED in January can request a hearing to object on the grounds that the garnishment would lead to financial hardship and ask to reduce the amount garnished. Finally, if borrowers are having trouble finding information, they can reach out to their Members of Congress and request casework help.

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