Title: How Trump's Spending Law Will Change Student Loans

[MUSIC]

Brian Lehrer: Brian Lehrer on WNYC. Now we'll look at the student loan provisions in the Trump budget and policy law. These have gotten less attention than some other aspects, like on Medicaid and the tax provisions, and the national debt, but the new law also comes with a major overhaul to how students and their families borrow money to fund higher education and how those in debt repay their existing student loans. Joining me to explain and answer your questions is Ayelet Sheffey, senior economic policy reporter at Business Insider. Thanks for coming on. Welcome to WNYC.

Ayelet Sheffey: Of course. Thanks so much for having me.

Brian Lehrer: Let's start with the students who have not yet taken out loans just yet, but are looking to finance a degree. Broadly, how has borrowing for student loans from the federal government changed in this new tax and spending law for people looking to borrow for next year or beyond?

Ayelet Sheffey: Yes, absolutely. This bill has a range of provisions here that will mean a lot of new repayment terms for new borrowers, and a key thing here is a change to repayment plans. Currently, there are a range of existing income-driven repayment plans that borrowers can take on. What this bill would do is really condense those plans into two main repayment plans.

One of those is a standard repayment plan, which is kind of a mortgage style. You make payments over a fixed period of time set by your servicer based on your income, and the other one is a new plan that this bill creates, that's called the Repayment Assistance Plan, and this plan would basically set a borrower's monthly payment at 1% to 10% of their discretionary income.

It would waive unpaid interest that borrowers have on their balances, and it would forgive their balances or forgive their remaining loans after 30 years. This is a big shift. The existing plans that we have right now have some a bit more generous terms, particularly the SAVE plan that Biden created, which allowed a quicker timeline to loan forgiveness, so with these plans, new borrowers are facing fewer repayment options, and it'll likely take them longer to eventually pay off their loans.

Brian Lehrer: Listeners, we can take your questions about student loan provisions in the new Trump budget and policy law, and I'm sure there are many. 212-433-WNYC, because there are many changes. 212-433-9692, call or text with your question for Ayelet Sheffey, senior economic reporter at Business Insider. Let me ask you about one particular repayment plan that I know we get a lot of phone calls about in general.

Did they change the Public Service Loan Forgiveness program? People who work in many nonprofit public service jobs could have the balance of their loans forgiven after 10 years, but many nonprofits on the list are, let's say, not favorites of the Trump administration. Has that been changed either for new borrowers or for people currently working in public service jobs aiming for that 10-year mark?

Ayelet Sheffey: That's a great question. Within the Trump bill, Public Service Loan Forgiveness remains intact. There, it does not change the terms of the bill. However, it's important to note that aside from the bill, Trump's Education Department is actually in the process of making changes to Public Service Loan Forgiveness. They're doing that through a process called negotiated rulemaking, which is a long process.

It includes conversations with stakeholders, periods of public comment, and this is following an executive order that Trump put out earlier this year calling for the eligibility of employers to be narrowed down to ensure that, that employers who are in public service align with the administration's beliefs and goals, so we're currently in the process of negotiations.

The department is working on changes to Public Service Loan Forgiveness to narrow the eligibility, but that will take time. None of those changes are final. They could very likely change, so that's something to keep an eye on, but in the bill itself, there are no changes to Public Service Loan Forgiveness.

Brian Lehrer: People who are on that track, already out of college and aiming toward that 10-year mark when the rest of the loan would presumably be forgiven, they don't have anything to worry about. It's not going to change for them in midstream, sort of after the fact of the terms they think they signed up for, or is that too broad a statement?

Ayelet Sheffey: The program itself, as of now, remains as it was. Borrowers enrolled in the program can continue making their payments toward PSLF, but I think that it's also important to note that the changes to income-driven repayment within the bill and also, in addition, there are new caps on loans for graduate and professional students, and a lot of students who are in professional programs rely on Public Service Loan Forgiveness.

These changes could indirectly make it harder for some borrowers to achieve forgiveness through PSLF if they choose to go that route. The program itself is untouched within the bill, but other changes to income-driven repayment could affect the way that borrowers may pay their loans toward PSLF down the road.

Brian Lehrer: Here's Kate in Forest Hills with a question about another loan repayment program that has been in effect, wondering if it's changed for students already out of school. Kate, you're on WNYC. Hello.

Kate: Hi Brian, how are you? Thanks for having me.

Brian Lehrer: Sure.

Kate: My partner has a SAVE loan currently, and I was wondering what the status of the SAVE loans are, if they're ever going to be back in effect, and if under PSLF, what his options will be if SAVE doesn't go through in terms of repayment. Yes, will he ever be able to pay off his loans? He was like a year and a half away.

Brian Lehrer: Kate, thank you. Maybe you can explain, Ayelet, for listeners who don't know the SAVE plan that she's referring to. I think the new law eliminates what was a Biden program, I believe called SAVE. Why don't you just describe it, define it, and then answer the caller's question about how much it has changed for people currently paying back loans on that?

Ayelet Sheffey: Yes, absolutely. The SAVE plan, as you said, was created under Biden in 2023. The SAVE was one of the most generous, affordable repayment plans that an administration had tried to put out. It allowed for more affordable monthly payments, a shorter timeline to student loan forgiveness, and pretty quickly after this was introduced, litigation blocked the plan in court.

We had a range of lawsuits from Republican-led attorneys general who were working to block the plan, and since I believe it was July 2024, that plan has been blocked in court. There are about 8 million enrolled borrowers on SAVE who have been on forbearance since then, meaning they have not been required to make payments toward their balances. Interest has not been accruing, and that continues to be the case.

As you said, this spending bill does eliminate SAVE. What this means is that borrowers who are enrolled in SAVE, the Education Department is recommending that they switch over to one of the existing income-driven repayment plans. Since the two that the bill creates are not available yet, borrowers can enroll in a different income-based repayment plan in this time.

The Education Department also did announce yesterday that interest will begin to accrue on SAVE borrowers' student loan balances on August 1st. This means that borrowers have just a few weeks before they will start seeing their balances begin to grow again, and the Department again recommended that borrowers who are on SAVE get on a different plan, or they will see their balances start to grow from interest while this plan remains in court.

Brian Lehrer: What's the rationale from the administration's point of view, for that particular change, which sounds like it would penalize people?

Ayelet Sheffey: They have long said that the SAVE plan is beyond the Education Secretary's authority. They say that the Biden administration did not have the legal authority to allow these generous terms for loan forgiveness. They said it's not within the realm of the Higher Education Act, so this move to eliminate SAVE, to restart interest on borrowers' payments, from their rationale, they say that they're acting in accordance with the law. They're having borrowers pay off their loans once again. They're restarting the system, and they're saying this is what they believe is within their legal capacity.

Brian Lehrer: That's a process explanation, but it sounds like, for some reason, they want student loan repayments to be more expensive. Correct?

Ayelet Sheffey: I think that, yes, this will essentially make payments more expensive, expensive for borrowers. I think, also, a big thing that we're seeing here is that they're trying to work in a cost-cutting mindset. If they are able to cut down the generous repayment terms that borrowers had in the past, this will allow them to get back the money that they weren't necessarily collecting over the Biden administration. Yes, I think it's correct to say that borrowers would potentially be facing those higher payments

Brian Lehrer: While they cut taxes for people in the upper-income brackets and corporations, that's the political argument as to where they should SAVE or spend money. Leah in Manhattan, you're on WNYC. Hello, Leah.

Leah: Hello. Thank you for letting me explain my experience with this. My ultimate question is, how is the staffing at the agency where student loans are being reviewed? I have been paying my income-driven repayments for my Master's in Library Science degree that I received. I've been working in public service for a long time. I'm six years in my qualifying payments. I, every single year, recertify, and I also send in my request for Public Service Loan Forgiveness every single year.

What that does is I always get a letter back that says, "You don't qualify right now, but what we did is we updated all of the months before to say that you are qualified now up to this point." That is going to be helpful for me. When the 10 years come, there's only going to be maybe 12 months of review instead of 120 months of review. I did that in October of last year, which was what I did every year.

Normally, it would take about a month or two to get a response that said, "Thank you for your payments. Thank you for your certification. We've updated all your past payments." I haven't had that letter since I applied last October. It's actually still being in review. I'm sure that has to do with staffing, but what is the impact of having staffing not reviewing these applications in the future?

How are we going to get this backlog? If the federal government's just going to keep changing this every couple of months, how is anyone going to be able to do this job? It seems like they're just kind of throwing things at student loan borrowers to make it more confusing over time, and putting us in a position where we will never actually get this done despite the qualifications that we do have.

Brian Lehrer: It's so interesting to hear this story, Leah, becausethis is one of the critiques that Democrats at least have of the Medicaid provisions, that they're not necessarily explicitly kicking people off Medicaid in a lot of cases, but they're putting up red-tape barriers to retaining your benefits or getting new benefits, and it sounds like what you're describing is that kind of red-tape barrier to maintaining your student loan benefits.

I wonder if this rings true to you, Ayelet, based on your reporting for Business Insider, or with respect to the staffing cuts in particular, is this an area where DOGE, laying off people from a lot of different government agencies, meets student loans?

Ayelet Sheffey: Yes, absolutely. I really appreciate you bringing this up. I think even in prior administrations, we've seen such a challenge for so many borrowers to overcome the red tape within the student loan system, just whether it's due to hours long wait times with their student loan servicer challenges, getting paperwork from federal student aid, and I think as you said, due to the cuts that we've seen within this administration, that problem is definitely exacerbated.

I believe earlier this year, the Education Department said they were cutting about 1,300 staffers across the Department. That slashed about 50% of the Department workforce, and that did impact the student aid operations, the ability for staffers to quickly process paperwork. Especially with Public Service Loan Forgiveness, we have so many people who are calling in, applying for, hoping to get relief through that program.

I've definitely heard from a range of borrowers who are just having these significant challenges, just getting answers, getting simple things answered about paperwork, as you said, so I think that's definitely something that is prevalent for a lot of people. The staffing cuts that we're seeing across the board, across all federal agencies, it's certainly adding to the red tape, the administrative hurdles that Americans are facing just getting help from federal agencies, and that definitely rings true at the Department of Education. Definitely a problem I've noticed and I've heard from borrowers, and these staffing cuts certainly aren't helping that issue.

Brian Lehrer: Leah, thank you for your story and for your question. I want to ask next about the graduate student loan program called the PLUS program, which has been eliminated. Tell me if this is related to the headline on your latest article, which asserts that the so-called "Big Beautiful Bill" could make it harder to become a doctor or a lawyer. Really?

Ayelet Sheffey: Yes. What we're seeing here within this bill is, as you said, the elimination of the Grad PLUS program. The Grad PLUS program allowed borrowers, so those who were seeking advanced degrees like medical or law school, to borrow up to the full cost of attendance for their educations, and as I'm sure a lot of us know, those degrees are expensive, and this loan program allowed borrowers to have that education covered while they were in school, with, of course, having to pay it off after.

That elimination of the program will make it harder for those students, for those borrowers, to pursue those types of programs, and that's also coupled with a new cap for borrowing for both graduate and professional students. For those who are seeking to take out student loans for law school or medical school, they have a lifetime cap of $200,000, and tuition for these programs are typically higher than that.

What I've heard from some education analysts, some student loan borrowers who are seeking to pursue either medical or law school, are that these changes will either block them from going at all because they just can't afford to cover the tuition in addition to these new caps, or some of these borrowers will have to turn to the private student loan market, which is typically a bit riskier.

The terms are a bit unclear, and the interest rates could be a lot higher. At a time when there's already a doctor shortage that we're seeing, these new caps could discourage a lot of new borrowers from even pursuing these programs, just because they don't have those financing options anymore.

Brian Lehrer: Wow. A listener writes, "Why is the root cause of the often impossible cost of college not the primary argument? Universities and colleges have exponentially raised tuition over the decades, and it seems that students taking out large loans has just been normalized, and academic institutions have been able to get away with these price hikes." What would you say to that text?

I don't know if you've ever reported on this, but there is an argument against generous student loan benefits or making student loans easy, that it just gives the universities an excuse to hike their tuition because they know the government is going to subsidize the students who have to take out the loans to go there.

Ayelet Sheffey: Yes. I think the cost of college is obviously the root of the problem here, and interestingly, it's something that, from what I've seen, aside from student loan forgiveness or more generous repayment plans, there is a desire for both Democratic and Republican lawmakers to put together policy, put forth legislation that would address the root cause of that problem.

We've seen states across the country who are working to expand apprenticeship options, make community college more accessible. We're also seeing Ivy League schools, or really, private schools that are prestigious across the country, also offering free tuition for students who are under a certain income bracket. There is that point that student loans is obviously a big way to finance education.

I think at the same time, we are seeing a slight shift towards changing the way that we are thinking about paying for higher education across the country, putting forth those options so students won't have to cover full tuition if they cannot afford to take out student loans. We're also seeing support across lawmakers in Congress to put forth support apprenticeship programs, expand the Pell Grant for low-income students, and really make those other options available to expand higher education access. I think that we're slowly seeing that shift, but of course, the student loan conversation still remains partisan and a continuing challenge for borrowers.

Brian Lehrer: Yes, and kind of to that point, I don't know if this is outside your beat since you're an economic policy reporter, but a listener writes really bluntly, "It's part and parcel of the overall attack on education. Trump wants idiots, period." Putting that in slightly more benign language, is it part of the culture war that Trump and people on the MAGA right in general just want fewer Americans to have four-year liberal arts educations?

Ayelet Sheffey: Well, I think the political argument there definitely plays a role. If we look at the prior executive orders that Trump put out this year, aiming to expand school choice within public schools across the country, he is really focused on ensuring that public classrooms are teaching in a way that aligns with his political ideology, and obviously, that's controversial.

We have a lot of Democratic lawmakers, teachers, parents who don't want that sort of direction in their classrooms. I think there is that line of thinking there, that what teachers are teaching in classrooms is on the line here, just with the way that Trump is influencing public education. I think that's something that we can definitely see play out over the years, and also just through the executive orders that he's directed his education secretary to implement.

Brian Lehrer: Before you go, are there any areas in which it's becoming easier to get student loans? I think I saw, with respect to Pell Grants, which is related but sort of a separate topic, there's at least one expansion, and that's availability for students going into vocational or other programs that are not four-year college degrees. Anything from you on that, with respect to student loans?

Ayelet Sheffey: Yes, absolutely. If we're looking on the Pell Grant side, so those are scholarships that low-income students can get, and as you said, there's a provision in the bill that would work to expand those to shorter-term programs. I think, as we were discussing, this is in line with the administration's goal and kind of an overall more bipartisan goal to make sure that other options are available for students who can't necessarily afford to go to a four-year college or pay that full tuition.

I think, if we're looking at grants, scholarships, things like that, students could see those becoming more readily accessible not only through this bill, but also we're seeing efforts at state, local levels to really expand those opportunities, offer even high school students more training and more programs so that when it's time for them to graduate, it's time for them to choose what they want to do next, they'll have options, whether that's going to a two-year college, a four-year college, a trade school, or an apprenticeship program. I think we can definitely expect to see an expansion of those over the next years.

Brian Lehrer: Ayelet Sheffey, senior economic policy reporter at Business Insider, thanks for explaining so much about the changes in the Trump budget and policy bill with respect to student loans.

Ayelet Sheffey: Of course. Thanks so much for having me.

Copyright © 2025 New York Public Radio. All rights reserved. Visit our website terms of use at www.wnyc.org for further information.

New York Public Radio transcripts are created on a rush deadline, often by contractors. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of New York Public Radio’s programming is the audio record.