**Trump Administration Initiates Overhaul of Student Loan Repayment Plans**
The Trump administration’s Department of Education has officially initiated the process to overhaul student loan repayment plans. Starting Monday, stakeholders will engage in negotiations concerning President Trump’s plans to modify existing repayment options and establish new borrowing caps. This initiative, rooted in Trump’s comprehensive spending law, is set to proceed through the negotiated rulemaking process. This includes stakeholder feedback and public comment periods before advancing to final implementation.
Overhauling Student Loan Repayment Plans
A major focus of the negotiation sessions is the proposed elimination of current income-driven repayment plans, to be replaced by two new options anticipated for rollout next summer. The first option, a standard repayment plan, will determine a borrower’s monthly payment based on their direct federal loans and prevailing interest rates. The second, the new Repayment Assistance Plan, will calculate payments as 1% to 10% of a borrower’s discretionary income, with a minimum monthly payment of $10. Importantly, this plan will waive unpaid interest and provide the possibility of loan forgiveness for remaining balances after 30 years.
| Repayment Plan | Description |
|---|---|
| Standard Repayment Plan | Payments based on amount of federal loans and interest rates. |
| Repayment Assistance Plan (RAP) | Payments set between 1% to 10% of discretionary income, offering loan forgiveness after 30 years. |
The Department of Education intends to implement these plans by July 1, 2026. While borrowers who take out loans before this date will have access to existing standard and income-based repayment plans, those entering the loan system after can solely enroll in the Repayment Assistance Plan.
Imposed Caps on Borrowing
Significant changes include the proposal to eliminate the Grad PLUS loan program by July 2026, which currently allows graduate and professional students to borrow up to their program’s full attendance cost. Proposed adjustments would cap graduate borrowing at $20,500 annually and $100,000 over a lifetime. Professional students would face caps of $50,000 annually and $200,000 over their lifetime.
The draft also aims to refine the definitions of graduate and professional students. Professional degrees illustrating high-level expertise, such as in pharmacy, dentistry, and veterinary medicine, meet these criteria. However, degrees not associated with medicine—like an education doctorate—are not expressly included, posing limitations on some professional degrees under new borrowing limits.
Reforming Deferment and Forbearance Options
The department proposes discontinuing deferments for economic hardships and unemployment for loans disbursed after July 1, 2027. However, it aims to broaden options for borrowers in default by enhancing loan rehabilitation opportunities. Starting July 2027, borrowers can rehabilitate their loans twice, a shift from the current one-time allowance. Rehabilitation would involve making nine consecutive payments within twenty days of the due date over ten consecutive months, after which the default would disappear from credit reports.
As the Department of Education progresses with these proposals, the financial landscape for students might see transformative changes, impacting loan accessibility and repayment for many.
