Student loan borrowers face abrupt 180 as GOP budget plans threaten to raise payments
Student loan borrowers could see their payments increase under budget plans currently under discussion by House Republicans, a violent about-face after years of working with the Biden administration to lower payments and secure debt relief.
While the GOP proposals might change quickly, student loan forgiveness is now a thing of the past, and borrowers are bracing as their loans become a potential reconciliation target.
“We really see this as an attack on students and working families with student loan debt. We’ve seen an array of really problematic proposals that are on the table for congressional Republicans,” said Aissa Canchola Bañez, policy director for Student Borrower Protection Center.
“Many of these would cause massive spikes for families with monthly student loan payments,” she added.
The House and Senate are working on competing massive legislative packages to fund the government and advance President Trump’s agenda, with the lower chamber aiming to vote on its budget reconciliation resolution as soon as Tuesday. With a slim majority, Speaker Mike Johnson (R-La.) can afford few defections.
House Republicans had more than a dozen proposals on the table in a January memo about how to cut higher education costs, with some considered more likely to come to pass than others.
One that is seen as probable is the death of the Biden-era Saving on Valuable Education (SAVE) income-driven repayment (IDR) plan, which the 8th U.S. Circuit Court of Appeals ruled to block last week.
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Along with ending the SAVE plan, which dropped some borrowers’ payments down to $0, Republicans want to streamline other IDR plans down to two options for loans that began after June 30 of last year. Lawmakers estimate this would save $127.3 billion in 10 years.
An analysis by The Institute for College Access & Success showed the average payment by student borrowers could go up by almost $200 under this proposal.
Republicans have been split over the reconciliation package, as moderates in the party are concerned about potential changes to Medicaid and others are worried about covering all the tax cuts in the bill; the House is aiming for $2 trillion in spending cuts.
“There’s a couple of folks who just have lingering questions, but I think all those questions can be answered and we’ll be able to move forward,” Johnson told reporters.
The Senate passed its own budget resolution last week, though it has not released specifics on higher education cuts yet.
Lawmakers face a March 14 deadline to fund the government.
House Republicans are also considering pulling back some regulatory authority from the Department of Education so the agency could no longer propose sweeping student loan cancellations without congressional approval.
The shift toward potentially raising borrowers’ payments is a far cry from the last four years, but conservatives who objected to former President Biden’s efforts at student debt relief say they are eager to get back to the system as it should be.
“Our big concern with the student loan programs was it … wasn’t done through Congress, where it wasn’t a matter where the people’s representatives had an opportunity” to weigh in, said Patrick Wright, vice president for legal affairs at the Mackinac Center for Public Policy, a group that sued the Biden administration for forgiving student debt for 800,000 borrowers. “It was a single person in a single branch the government attempting to subvert the democratic process.”
“My understanding is that there’s 45 million people that have student loans, which means that there’s 45 million different experiences on the process,” Wright said. “There was a law involved with these loans, and if Congress decides, in the future, going forward, that they are going to offer some sort of relief, and that’s gone through the democratic process … but complaints based off of illegal actions taken by the previous presidential administration, those are not something that people should have been able to rely upon.”
Some of the programs under fire were created with bipartisan support, such as Public Service Loan Forgiveness (PSLF), which gives debt relief to teachers, police officers and others in public service after 10 years of payments.
Republicans want to make some reforms to the program, including limiting who is eligible.
Lawmakers are also looking at other options such as adding limits to how much students can borrow, limiting who can apply for loan discharges under Borrower Defense, canceling Parent Plus loans, establishing risk-sharing payments for colleges, eliminating interest capitalization and reforming Pell Grants.
“I think borrowers are concerned,” said Natalia Abrams, president and founder of the Student Debt Crisis Center, adding she is reminding borrowers “we don’t know what’s going to happen.”
“We understand their fears, but things like Public Service Loan Forgiveness in the past have had bipartisan support. It’s hard to know where that will go. What will it be like? Will they grandfather existing folks to the programs or not? It’s just a very concerning time for borrowers,” she added.
With all the changes that could occur to the system — not to mention Trump seeking to shut down the Education Department entirely — student loan advocates are pushing borrowers to document their payments to ensure they can prove progress on their loans.
“Borrowers should document and take screenshots their studentaid.gov, their servicer page,” Abrams said. “This is not that we necessarily think they’re going to take down the department’s website. It’s more that if anything goes haywire with your account, you can prove, especially with the IDR tracker, where you were at. If you’ve been working in a public service job but haven’t gone and filled out the PSLF Help tool, that’s something you can do to help potentially safeguard yourself. We don’t know anything for sure but enroll if you’ve been thinking about enrolling in a program.”
She added it is important for borrowers to join programs that were established legislatively, such as income-based repayment instead of income-contingent repayment, as they may be more likely to survive.
“The other thing is advocacy. Call your senators, call your members of Congress, send a letter, if you have the ability to show up at a local office, share your student loan story. They need to hear from folks, and advocacy does work,” Abrams said.
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Student Loan Borrowers, You May Need To Change Repayment Plans In 2025 — And It Could Be Costly
WASHINGTON D.C, USA – FEBRUARY 11: Speaker of the House Mike Johnson (R-LA) speaks at a press … [+]
A huge number of student loan borrowers may need to change their repayment plan this year, as federal courts and Congress make moves that could fundamentally reshape the federal student loan system. And many of these borrowers may experience an increase in their monthly payments as a result.
The assault on the current federal student loan repayment system is happening on two fronts. Earlier this week, a federal appeals court issued a sweeping decision that signaled that the SAVE plan, as well as student loan forgiveness under two other income-driven repayment plans, are likely to get struck down. Meanwhile, congressional Republicans are moving forward to develop cost-cutting plans to offset the massive costs of extending and expanding tax cuts; squarely in the GOP crosshairs are these very same programs.
If these repayment plans are overturned, repealed, or fundamentally changed, many federal student loan borrowers will have no choice but to switch to a different, more expensive repayment plan. And the additional costs could be significant.
On Tuesday, the 8th Circuit Court of Appeals issued a significant ruling in the ongoing litigation over the SAVE plan, a Biden-era income-driven repayment, or IDR, plan.
Like all IDR plans, the SAVE plan utilizes a formula applied to a borrower’s income and family size to calculate a unique, affordable monthly payment, with eventual student loan forgiveness after a set period of time (in most cases, after 20 or 25 years). But SAVE is more generous than other IDR plans and features lower payments, interest benefits, and fast-tracked loan forgiveness for certain borrowers. A coalition of Republican-led states filed a lawsuit last spring to halt the program, arguing that it exceeds what Congress authorized when it first enacted legislation creating IDR plans more than 30 years ago.
In its ruling this week, the 8th Circuit extended and expanded a preliminary injunction blocking the SAVE plan. As a result, millions of borrowers enrolled in SAVE who have been placed in a forbearance will continue to have no payments due and no interest accruing, but the time will also continue to not count toward student loan forgiveness for IDR plans and also for Public Service Loan Forgiveness, or PSLF — a related program that can wipe out a borrower’s balance in as little as 10 years if they work full-time for qualifying nonprofit or public employers.
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But the 8th Circuit’s ruling went even further, also extending an injunction blocking student loan forgiveness under two other IDR plans that were created through the same legal process as SAVE: the ICR plan, and the PAYE plan. While these two plans remain open, student loan forgiveness at the end of 20 or 25 years is blocked for both plans. And the decision signaled in no uncertain terms that the court is likely to strike down loan forgiveness under ICR and PAYE. That would upend decades of regulations, loan contracts, and public guidance assuring borrowers that they would be entitled to student loan forgiveness after fulfilling their repayment obligations under these IDR plans.
Meanwhile, Congress may take steps to fundamentally change federal student loan repayment plans and eliminate IDR student loan forgiveness altogether.
According to a House Budget Committee memo circulated several weeks ago, Republican lawmakers are evaluating a number of proposals to cut federal spending to offset trillions of dollars in costs associated with extending tax cuts. Squarely on the chopping block is the SAVE plan. But Congress may also move to repeal all of the other current IDR plans as well.
In place of these plans would be a new IDR option. That is good news for borrowers to some extent, as it would mean that there would still be an option to repay student loans based on income. However, this new IDR option would not feature any student loan forgiveness after 20 or 25 years, or any other set period of time at all. Instead, borrowers could only receive loan forgiveness once they have paid at least the total amount that they would have otherwise paid if they had enrolled in a 10-year Standard repayment plan. Many lower-income borrowers would never pay this amount, meaning they could be trapped in student loan debt for the rest of their lives. Republicans are also evaluating possible changes to PSLF eligibility, although no specifics have been provided yet.
Under the most recent version of the proposal, the changes would only apply to new loans taken out after June 2024. This could mean that borrowers currently in repayment would be able to continue accessing the existing repayment plan options – but only to the extent that those plans survive the legal challenge pending before the 8th Circuit Court of Appeals. The proposals by Republican lawmakers have not yet been finalized, and may not be for several more weeks at least.
Taken together, these threats to IDR programs may mean that many federal student loan borrowers will need to consider changing repayment plans. At least eight million borrowers are enrolled in SAVE alone, with additional borrowers currently repaying their student loans under the ICR and PAYE plans.
The Income-Based Repayment plan, known as IBR, may be the most realistic alternative option for most borrowers. Assuming the SAVE plan gets struck down or repealed, and student loan forgiveness under ICR and PAYE goes away as well, IBR would be the only way for borrowers in an IDR program to receive student loan forgiveness. IBR is not currently subject to a legal challenge, and because it was created by Congress through separate legislation that unambiguously allows for student loan forgiveness, even the 8th Circuit found that loan forgiveness is permissible through IBR. And many borrowers may be relieved to know that payments made under SAVE, ICR, and PAYE will count toward the loan forgiveness term under IBR — so switching plans should not reset the clock.
For borrowers on track for student loan forgiveness through PSLF, the landscape is a little more complicated. Just like IBR, PSLF is not currently subject to a legal challenge, and there is no dispute that loan forgiveness is permissible through this program. Under the PSLF statute and the governing regulations, payments made under all of the IDR plans can count toward loan forgiveness for PSLF. While SAVE is likely to get repealed or struck down, there is a possibility that borrowers on track for PSLF can continue to repay their loans under PAYE or ICR, even if loan forgiveness for those plans at the end of 20 or 25 years ultimately gets struck down (provided the plans themselves remain intact). IBR should also continue to be an option, provided Congress would allow current borrowers to be grandfathered in if they repeal it.
But changing repayment plans, either because of the 8th Circuit legal challenge or anticipated Congressional action, will likely result in higher payments for many student loan borrowers. This is particularly true for millions of borrowers in the SAVE plan, given that the repayment formulas for all other IDR options are more expensive.
“For the average borrower, the House Republican proposal would increase monthly student loan payments by almost $200,” according to research by The Institute For College Access and Success, or TICAS. “A borrower with average income for a recent Bachelor’s degree graduate would see payments increase by $193 per month.”
The changes could hit lower-income borrowers especially hard. “The House Republican proposal requires monthly payments at a lower income threshold, thereby protecting less income for basic needs,” says TICAS. “A borrower with a $30,000 annual income (less than $700 monthly discretionary income) will need to pay $54 per month or fall into delinquency.” And without any student loan forgiveness at the end of a fixed repayment term, lower-income borrowers would experience “a lifetime sentence of student loan debt.”
Higher-income borrowers could see even more significant changes to their monthly payments. A borrower earning $100,000 per year who took out undergraduate student loans before 2014 would have payments of around $270 per month under SAVE. But if they have to switch to IBR, their payments would skyrocket to nearly $1,000 per month. Other higher-income borrowers may not even be able to enroll in IBR if their income is too high due to the program’s partial financial hardship requirement — which could leave borrowers who spent years working toward eventual student loan forgiveness with no end in sight.
And Parent PLUS borrowers could be even worse off. ICR is typically the only IDR option available for Parent PLUS loans, a type of student loan provided to the parent of an undergraduate student. If ICR student loan forgiveness at the end of 25-years gets struck down or repealed, Parent PLUS borrowers may have no other viable repayment option, and no other way of discharging their student loans. Many of these borrowers may default as a result.
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SAVE Plan And IDR Student Loan Forgiveness On The Cusp Of Getting Struck Down
Congress Is Poised To Repeal Student Loan Forgiveness Under IDR Plans
Many Student Loan Borrowers May Need To Change Repayment Plans
Student Loan Payments May Be Higher After Changing Repayment Plans
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Should you refinance your student loans? It could be a smart decision—‘the landscape is shifting’
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Historically, the benefits of federal student loans have mostly outweighed those of private loans.
The government’s loans come with protections such as a fixed interest rate determined by Congress, borrowing limits to help ensure undergraduate students aren’t taking on too much debt and various repayment plans. Plus, programs like Public Service Loan Forgiveness have allowed federal borrowers to have their loans forgiven.
Given all these benefits, refinancing federal student loans into private loans has generally been discouraged by experts and advisors. But recent developments in the federal student loan program may be making private financing more attractive.
The last five years have highlighted both the benefits of federal loans — borrowers got a three-year break from payments during the pandemic, for example — as well as the limits. Federal borrowers stood to benefit from President Joe Biden’s debt forgiveness initiatives, but many of them were ultimately struck down in court.
Under the Trump Administration, it is unlikely any student loan forgiveness will continue. There is also concern that the dismantling of the Department of Education could upend federal student loan servicing altogether.
“While refinancing federal loans into private ones has traditionally been seen as risky, the landscape is shifting,” Alyssa Schaefer, general manager and chief experience officer at digital banking platform Laurel Road, tells CNBC Make It.
Here’s when refinancing your student loans from federal to private may make sense.
The primary benefit of private student loans is that borrowers who have good credit scores may be able to get a lower interest rate than the flat rate federal borrowers receive, saving those borrowers money over the life of the loan.
“The best candidates to refinance are high-income earners with a good credit score,” says Hermes Conesa, an advisor at Student Loan Planner. “If they also have high debt, this may save them a lot on interest.”
New federal undergraduate student loans disbursed between July 2024 and July 2025 come with a 6.53% fixed interest rate. Borrowers with excellent credit may be able to refinance to a private loan with an interest rate below 5%, according to SmartAsset. Plus, lenders typically don’t charge origination or application fees for student loan refinancing.
Say you have a $30,000 student loan balance. To pay it off in 10 years with the federal interest rate of 6.53%, you’d pay $341 a month for a total of $40,932, according to SmartAsset’s payment calculator.
But for a private loan with a 4.99% interest rate, you’d pay $318 a month over 10 years for a total of $38,166. Assuming you make every monthly payment in full, you’d save around $3,000.
If you’re considering refinancing from federal to private student loans, you “need to do a total cost analysis comparing both paths,” Schaefer says. Personal circumstances, such as your credit score and debt burden, will impact your refinancing options.
“Look at how much you’d pay over the life of the loan under federal programs versus private refinancing,” she says. “If there’s substantial savings and you’re financially stable, refinancing could be worth considering.”
It’s also important to keep in mind what you’d be giving up. Borrowers who want any chance at having their loans forgiven through PSLF should stick with federal loans, Conesa says, as private loans are ineligible.
He adds that the common advice to generally avoid refinancing hasn’t changed, in part because federal borrowers still have access to valuable benefits like income-driven repayment plans. Though Trump and Republicans in Congress have floated changes to those options, as well as the elimination of PSLF, plans like income-based repayment are still available for now.
And remember that refinancing is irreversible, Schaefer says. If another president reinstates or expands benefits for federal loan borrowers in the future, you would likely not be eligible.
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