Millions of student loan borrowers could see their monthly loan payments increase in 2025 as several of President Joe Biden‘s rules expire in the new year.
Next year, borrowers who are in an income-driven repayment (IDR) plan could see higher payments. These plans allow federal student loan borrowers to see a lower payment amount based on income and family size, and they also often qualify for total student loan forgiveness after 20 or 25 years.
“As we head into 2025, borrowers find themselves in a really difficult position, and facing tremendous amounts of uncertainty,” Michael Lux, an attorney and the founder of the Student Loan Sherpa, told Newsweek. “Millions of borrowers signed up for the SAVE repayment plan, and the vast majority of them should expect to see their payments increase. SAVE as we know it is unlikely to survive.”
Currently, around 8 million borrowers are enrolled in the Saving on a Valuable Education (SAVE) IDR plan alone. SAVE was created under Biden’s administration as the most affordable repayment plan available, allowing many borrowers to get significantly lower monthly payments.
Because SAVE is being legally challenged at the 8th Circuit Court of Appeals, though, it could likely disappear in 2025.
“These programs could be on the chopping block of a new administration, especially after numerous legal challenges from states opposing the student loan forgiveness strategy the Biden administration implemented,” Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. “If you’re currently benefiting from one of these plans, the unfortunate reality would be in their absence, your student loan monthly payment would go back up to its rate pre-implementation of these plans.”
If SAVE makes its way out of the 8th Circuit unscathed, President-elect Donald Trump could still end up repealing it under his administration’s new Department of Education (DOE).
“Borrowers are likely to face higher repayments, potentially leading to more defaults. Given Trump’s past ties to the legal issues surrounding Trump University, it’s unlikely he will support loan forgiveness initiatives,” Kevin Thompson, a finance expert and the founder and CEO of 9i Capital Group, told Newsweek.
The 8th Circuit is also considering repealing the DOE’s student loan forgiveness after 20 or 25 years of payments under other IDR plans.
If these plans are dissolved, borrowers would be forced to switch to Income-Based Repayment, which tends to offer far higher monthly payments. For example, a borrower making $60,000 a year who took out loans before July 2014 would likely have to pay $470 under Income-Based Repayment, compared to just $220 under SAVE.
All borrowers in an IDR method will also see an increase over the next year due to income recertification. This was initially paused during the coronavirus pandemic.
Parents who signed up for Parent PLUS loans could see higher payments if SAVE is struck down too. That’s because the double consolidation loophole, which allows a parent with more than one loan to consolidate them twice, is likely disappearing next year.
For Parent PLUS borrowers with an income of $100,000, their SAVE payments would likely go from $645 to $1,400 monthly under the income-contingent repayment (ICR) plan.
Even though many worry about Trump’s impact on student loans, Lux said there will still be protections for borrowers written into the law.
“Many federal student loan borrower protections should still be available during the Trump administration as these protections are written into statutes and the contracts that borrowers signed,” he said. “However, the responsibility will fall to borrowers to find the best avenues to move forward with their debt.”
Trump has made it clear he was against Biden’s attempts to forgive student loans over the years.
During his debate against Vice President Kamala Harris in September, Trump attacked Biden and Harris for failing to deliver on their promise to cancel student loans. He called the administration’s initial plan for widespread student debt cancellation a “total catastrophe” and said it would have been “unfair” to the millions of Americans who did repay their loans.
During Trump’s first term, his administration pushed for monthly payments to increase from 10 to 12.5 percent of borrowers’ discretionary income and also wanted to merge all IDR plans into one simplified option.
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