Title: Student Loans and the Dismantling of the Education Department

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Brian Lehrer: It's the Brian Lehrer Show on WNYC. Good morning again, everyone. You've been hearing the news of the Trump executive order to begin dismantling the US Department of Education. It would take an act of Congress to abolish it officially, but Trump and his education secretary, Linda McMahon, are downsizing to the extent that they say is allowed by law. That involves telling half the staff to stop doing their work and much more. It has many potential implications for American students at various levels. We will focus primarily now on the implications for people with student loans, with Annie Nova, CNBC personal finance reporter focusing on education, who's been reporting on this. Annie, thanks for coming on. Welcome to WNYC.

Annie Nova: Thanks for having me.

Brian Lehrer: Listeners, we're inviting your questions about student loan programs as the federal Department of Education gets dismantled. 212-433-WNYC, or your stories that might help others. 212-433-9692. Stories or questions for Annie Nova from CNBC. 212-433-9692 about student loans in the era of shutting down the Education Department. You quote consumer advocates who say this couldn't come at a worse time for student borrowers. Why is that?

Annie Nova: Yes, exactly. Just take a step back for a minute. President Joe Biden forgave more student debt than any other president in history. Yet, believe it or not, outstanding federal education loans still grew while he was in office. Americans owe more today on student debt than they did four years ago, despite that historic forgiveness. That's because, each year, millions of students have to take on more loans to go to college. Americans are really struggling with this debt. Some recent data showed somewhere around 9 million people are behind on their student loans.

A number of promises that the Biden administration has made were unfortunately not able to reach borrowers because of court decisions and a number of legal challenges. He promised to forgive up to $20,000 for millions of borrowers, and the Supreme Court ultimately struck that down. In the meantime, borrowers had their payments on hold during the pandemic. As they transition to repayment, they're finding that not only did, in many cases, much of that forgiveness not come through, but they're also being saddled with much higher payments. I hear from borrowers all the time who say that they expected a $50 payment, and now they're looking at a $300 payment, in some cases more. They're getting these much bigger bills at the same time that a lot of the relief options are narrowing.

Brian Lehrer: One issue that you cite is for borrowers in or applying to various of the student loan forgiveness programs, such as the income-driven repayment plan, under which some student loans get canceled. Briefly, how does that work and for people with what kinds of incomes?

Annie Nova: Yes, exactly. What happened was, after the Supreme Court struck down Biden's sweeping student loan forgiveness plan, he looked for other ways to deliver relief to borrowers, especially as they made that transition back to repayment. One answer they came up with was the SAVE Plan, which it billed as the most affordable repayment plan for student loan borrowers ever. Borrowers were promised that their bills would be cut in half. Then, shortly after that plan was rolled out, a number of Republican-led legal challenges put that plan on hold, and then a court ultimately struck that down recently, and so borrowers who were in that plan remain in limbo.

The Trump administration recently has decided to take down all the other income-driven repayment plans. These are plans that are cap borrowers pay a monthly bill at a share of their income. Consumer advocates are saying that the Trump administration has read this court order regarding the SAVE Plan too broadly by taking down all of these other plans, and so borrowers right now don't have an affordable option.

Brian Lehrer: Here's a caller who I think has a question about the income-driven student loan curve. Joe in East Harlem, you're on WNYC. Hi, Joe.

Joe: Hi. Based on what your guest said, that it kind of is my question also. If the Education Department were to be shut down, what would happen in the future with the option of those income-based repayments? Let's just say, hypothetically, that they were allowed to stand with the Education Department, but with the Education Department potentially closing, would those options still be available for either borrowers who are currently enrolled in one or not yet enrolled in one? How they would do so, especially if loans went over to private servicers.

Brian Lehrer: Thank you, Joe. Annie, do we know yet?

Annie Nova: Sure. Your question is one that probably some 12 million other borrowers have who are in those income-driven repayment plans. The Trump administration says that those plans will be available again soon. We don't know what form they'll take, but they are saying they're reworking those plans to comply to the court order. In theory, in some short amount of time, you should have access to at least one of the income-driven repayment plans, but we just don't know yet what that will look like. In Trump's executive order yesterday, there was some mention of potentially privatizing the student loan space. We have no idea what that will look like. There's just a lot of uncertainty right now, which of course is adding to borrowers anxiety.

Brian Lehrer: Joe, I know that doesn't answer your question as thoroughly as you might have hoped, but that's the answer that apparently there is right now, that there's all this uncertainty. Let me follow up with you on that, Annie, because I think one of the cases that Trump has been making is that it doesn't really matter if there's an Education Department per se. Other departments of the federal government can pick up these same programs. With respect to student loan repayment, maybe it's going to go to the Treasury Department, because that's where money that's paid to the federal government goes.

With respect to other Education Department programs, like Title 1 grants to schools with a lot of low-income students, things like that, the real discussion, the real debate that's really going to matter to people's lives is whether they continue that program, which is separate from what agency administers that program. Would you say that's accurate? Like, keep our eye on the ball here of the programs, not which bureaucracy administers it?

Annie Nova: Yes, I think that is a good way of looking at it. Actually, from what I heard in the Trump administration's aim of dismantling the Education Department, the $1.6 trillion federal student loan portfolio was viewed as one of the biggest challenges. Actually, the other agencies floated the Treasury Department, Small Business Administration, apparently they don't want this massive headache. It could end up actually staying with the Education Department. I think your point is right, that the certain loan programs and the Pell Grant program, for example, which is the biggest way that low-income families are able to send their children to college, these are required by Congress, and they'll have to be implemented in some way.

That being said, I've heard from consumer advocates if there really was a transfer of 40 million student loan accounts between agencies or to a bank, it would cause a lot of headaches. They recommend that borrowers take pictures of their loan accounts now and try to keep track of their records and their payment progress, so they have a record of that in case things get lost in all of this change.

Brian Lehrer: Let's talk about another category of student loans and student loan forgiveness. Listener writes in the text, "Please ask if the Public Service Loan Forgiveness plan will survive." Just to explain this briefly to our listeners, this is for people working at certain nonprofits or other eligible jobs considered public service jobs. How does that one work?

Annie Nova: There's so many confusing headlines on this. One thing I would say to borrowers, if, when you signed up for your loans, the Public Service Loan Forgiveness Program was available, then you are entitled to that, and it is a right that you'll have. It would be considered a breach of contract if that changed on you throughout your repayment. At the same time, we saw the Trump administration slow-walk applications for forgiveness in its previous term. Borrowers definitely want to try to reach out as much as possible, keep track of their payments, make sure they're getting credit for that time that they are working a public service job.

Adding a wrinkle to this was the president's recent administrative order that did target the Public Service Loan Forgiveness Program. It said that certain nonprofits that we don't know exactly yet what categories it will be, but that perhaps are involved in DEI diversity efforts that aid immigrants or that work with LGBTQ folks could be excluded from the PSLF program. Again, those changes would be for new borrowers. If, when you signed up for the program, your organization was included, then that time will still count towards your forgiveness.

Brian Lehrer: Oh, do you think that particular question might wind up in court? Because I can say we've heard, in a previous segment, from a number of listeners who are already in their repayment. They finished school, and they're paying back their loans, and at the end of 10 years of paying back their loans, the rest of it gets forgiven under the Public Service Forgiveness Program. They've been very alarmed by hearing the president lay out these categories specifically, as I heard them, for any people working at a nonprofit that works with undocumented immigrants, obviously a group that's in Trump's sight or working with trans people or any organizations related to trans people, that they're being cut off. You're saying that if you're already in the program, you can be confident that when you finish your 10 years of repayment, that's still going to apply no matter what Trump does.

Annie Nova: That should be the case for the time you've worked previously for that organization. There's a world in which, if certain organizations are laid out to be excluded from the program going forward, then the future time might not count. This all might be challenged because, right now, the Public Service Loan Forgiveness Program is available to 501(c)(3)s nonprofits that, it's an IRS category. It's very unclear what this will look like trying to dice out which nonprofits account for this. Critics of this executive order point out that the president seems to be using debt forgiveness as a kind of way to say, "These are the nonprofits we like and that we don't like." It's unclear if that'll hold up in court. For now, people in Public Service Loan Forgiveness remain safe.

Brian Lehrer: Related question, I think, from Jonah in Astoria. Jonah, you're on WNYC with Annie Nova from CNBC. Hello.

Jonah: Hi. We were completely in sync. It was exactly about the public service program. My husband is a teacher in public schools and is just coming up on the eligibility for that Public Service Loan Forgiveness, and so I was wondering how that was affected. Of course, with all of this, the big concern is that everything is under attack and will there even be people there to process the paperwork when it comes time for it to come through? That's the big thing that's hanging over all of this, apart from the rules. Who says the rules are going to be followed?

Annie Nova: Yes, I think those are fair concerns. Experts have pointed out to me that it is the US Department of Education that signs off on loan forgiveness for each borrower. While you have these different companies that manage those federal student loans for the government, it is people at the US Department of Education who sign off on that forgiveness. We know the staff has been reduced by a half. This is a big concern. A number of Education Department employees that I spoke to for previous stories, it was their job to handle issues borrowers ran into with their servicers when they were having issues getting the loan forgiveness to which they're entitled, and they would advocate for them. Unfortunately, those people are no longer there, so I definitely understand your concerns. I guess the silver lining here is that legally your partner is still entitled to the program, and if they're coming toward their end, that you might be debt-free very soon.

Brian Lehrer: Jonah, good luck to you and your husband. Here's another question about the Public Service Loan Forgiveness Program and a story, I think, from Sherry in Smithtown. You're on WNYC. Hi, Sherry.

Sherry: Hi there, Brian. I'm calling about a family member who's in Public Service Forgiveness. She's got two years left to go. She can't recertify her income. She's in a pay as you go, pay as you earn. She's been now, by Mohela, her servicer, been put into a standard repayment of something that's 10 times what she was paying from like $275 a month to $2,500.

Brian Lehrer: Wow.

Sherry: The question is, should she pay it until the courts figure that, come to a decision? Will she be thrown out if she doesn't pay it because she didn't make a payment on time and based on the standard repayment plan?

Brian Lehrer: She was in one repayment plan that was $275 a month and got switched by somebody into one in which she has to pay $2,500 a month. Do you know who switched her and what they said?

Brian Lehrer: Mohela.

Sherry: Okay. Are you familiar with Mohela, Annie? Can you help this caller?

Annie Nova: Yes, sure. Mohela is one of the companies that service the federal student loans for the government. I imagine that this issue is probably one other bars are again facing because, for now, the Trump administration has suspended applications to income-driven repayment plans. With uncertainty about if those plans are available, borrowers, it's not surprising me they're being opted into the standard repayment plan, which is just, yes, as the name says, the standard repayment plan where your payments are just split over 10 years.

Many borrowers cannot afford their payments on these plans. This is why Congress, in the 1990s, created plans that were based on people's income. That's a huge jump. Very understandable that that's causing difficulty. It's something that I'm hearing from borrowers over and over again, that their bills are increasing. In terms of advice, I would reach out to the servicer and make clear that that bill is too much right now, and maybe they can put you into a forbearance or some kind of deferment, a pause on payments. While some of these legal issues with the repayment plans get sorted out, most borrowers will just not be able to make some of these much higher payments.

Brian Lehrer: Sherry, I hope that's helpful.

Sherry: Right. Yes, thank you so much.

Brian Lehrer: Thank you very much. Listeners, if you're just joining us for a few more minutes, we're talking about the implications for student loan borrowers and people in various repayment plans and loan forgiveness plans of the Trump administration dismantling the federal Department of Education, which currently oversees student loans. 212-433-WNYC. As we're taking your stories and questions for Annie Nova, CNBC personal finance reporter focusing on education, who's been reporting on this. I think we're going to switch now from various repayment plans and how they may be affected to Stephen Summit who's going to talk about people who haven't yet gotten into college but are looking at the prospect of student loans. Steve, you're on WNYC. Thank you for calling in.

Steve: Hi, Brian. I have a lot of higher education experience including Director of Financial Aid and Vice President at university. I don't know why, when I thought of the various ways that ending the department will be a problem, why I thought of this, the following example. It's done so much good in terms of access, but what I thought of is this. The department has also been in the front lines of fighting against proprietary schools. I'm not saying every proprietary school, but for-profit proprietary schools that begin contacting military before they are finished with their service, that make all sorts of promises about jobs and not force, but make the only way the student can come to Affinity X Sewing Machine College is by taking out large amounts of student loans, which are extraordinarily difficult to pay and often were based on promises about careers that never were going to pan out and that didn't pan out. If there is really an interest in fraud and abuse, you're getting rid of an agency that among the great things it does, it also polices and goes after proprietary schools that get students in very deep trouble.

Brian Lehrer: Interesting category. Is it one you've reported on, Annie?

Annie Nova: Yes, absolutely. There's a huge issue with for-profit schools. People who go to these schools tend to have much higher default rates. The recruiters at this school prey on people of color and other low-income students and the outcomes are just not as good. A lot of this gets back to why the US Department of Education is the agency tasked with student loans. Unlike the treasury or a bank, there's an understanding that, because the US largely funds higher education through debt, that there needs to be a number of robust consumer protections.

You have people at 18 who are making financial decisions that will impact them for the rest of their life, and so the US Department of Education has something called the Borrower Defense Application. If you've been defrauded by your school, you could make the case that your federal student loans should be forgiven by the government. That doesn't exist in all situations in the private market, of course. There's a number of other protections. If your school closes out of the blue, which is another issue that students deal with, you also might be eligible for student loan forgiveness, if you become disabled. There's a number of other reasons. The argument is that we need robust consumer protections if this is the way we fund higher education.

Brian Lehrer: Steve, thank you for raising that category. A listener asks a very straightforward, simple question that I'm sure has a complicated answer. How does this impact those applying to go to college this upcoming fall?

Annie Nova: I think a really important thing to keep in mind is I've been stressing that if you signed your loan five years ago, you're entitled to the programs that exist right now. New borrowers really do need to be careful because it's a landscape that is changing every day. You have to keep reading the different terms that are available to you. If programs disappear, or they're canceled, you need to make sure that that wasn't one you were counting on when you make your borrowing decisions. The rule of thumb generally is that you don't want to borrow more for college than you plan to make in your first year out of school. You can go to the Department of Labor's website and look at different starting salaries for different careers, and just try to make the best decision so that the student debt is not a huge burden to you as it is for millions of people.

Brian Lehrer: Interesting. You wrote an article yesterday about what could happen to your student loans without the Education Department. Maybe it's important to remind people that you started that article by saying, for now, even with half the education staff already laid off, student loans will continue to be administered by the slimmed-down agency. Is that just moving the deck chairs around in the bureaucracy and people shouldn't even focus on that, or does that help people understand their own student loan situations at all? To know that for the moment, as some Education Department functions are being distributed to other agencies, student loans are not?

Annie Nova: Yes, that remains the case today. Although President Trump has said that he doesn't think that student loans are the Education Department's business and that he would like to see the Small Business Association or the Commerce Department or Treasury take it over. I think borrowers should just really pay attention to this and all the developments and see where their student loans end up. As I mentioned before, if there was going to be a transfer of 40 million loan accounts, there could be lost information, there could be errors in your loan account. Particularly for people who are pursuing loan forgiveness, you want to keep a record of your payment progress so you have some records to show if your loans end up at the Small Business Association, and they say you owe double what you think you owe.

Brian Lehrer: On paying a lot more than you thought you owed, we had that caller before who was talking about her daughter who had a $250 or $275 a month student loan repayment and heard, I guess from Mohela, that it's going up to $2,500 a month. I think Alex in Philadelphia is calling with some advice for that family and others who may find themselves with their own suddenly increased loan repayment demands. Alex, you're on WNYC. Hello.

Alex: Hi. Hi, Brian. First-time caller, literally lifetime listener, so this is crazy. I'm so happy to be calling you. My experience is that I have been working in higher education since 2017, so I've been part of the Public Service Loan Forgiveness Program since 2017. A couple months ago, I finally got a job offer from the private sector. For the first time ever, I had to make the decision whether or not I wanted to take this much higher-paying job, but it would cause me to step out of the Public Service Loan Forgiveness process. I only had less than two years left to pay off because I had been really aggressively paying my loans down. I've been in the program for a while, so I was really, really concerned to take it.

A part of me was thinking maybe I shouldn't take this job. I called Mohela and Mohela, literally, the woman on the phone told me, she said, "Your progress in your Public Service Loan Forgiveness is not going to go away. Go into your account, screenshot everything you possibly can see. Go into your bank statements. Make sure that every payment that's gone into your thing has been highlighted, and keep a folder of everything that you've done so far. Then don't touch anything." She was saying that the government is going to have to have a replacement for the SAVE program, or the lowest amount of money that you can pay on your loans.

For people who are in Public Service Loan Forgiveness, if you had also been on the SAVE Plan, you're in what's called administrative forbearance. She was saying, "Don't touch anything. Regardless of what kind of forbearance you're in, if you're part of Public Service Loan Forgiveness, just don't touch anything in your account until after the litigation is over." Because there's going to be so many people who are so upset that these different avenues for forgiveness or lower payments have gone away, they're going to have to replace it with something. Before they can take something away, they may need to put a replacement in place. She was just saying, absolutely, put a hold on everything. Stop, don't touch a thing, but take screenshots of absolutely everything that you have and every payment that you've made so far.

Brian Lehrer: Really good advice, Annie, for people in various categories. I was singling out that previous caller, but this is very broadly applicable advice from Alex in Philadelphia. Right?

Annie Nova: Yes, absolutely. Really good advice. The more records you have, the better case you'll be. It's just so unfortunate that so many borrowers have to be so worried right now about programs to which they were promised eligibility. Yes, it makes me sad to hear, but this is the precautions borrowers need to take. It seems like they've really learned through years of working with what consumer advocates describe as a dysfunctional student loan system, they really need to protect themselves and do everything that was within their power.

Brian Lehrer: Alex, thank you for that. Please call us again. One last thing. Here's a very short clip of one of the things that Trump said yesterday as he was signing the order to start the dismantling of the Education Department.

President Trump: We want to return our students to the states where just some of the governors here are so happy about this. They want education to come back to them, to come back to the states, and they're going to do a phenomenal job.

Brian Lehrer: That, of course, starts 53 different debates. As it pertains to student loans, Kate in Brooklyn has a question. Kate, you're on WNYC. Hello.

Kate: Hey. What a great conversation. Thank you so much for having this kind of segment on because, as you just said with Alex, so many of us are so nervous about this all the time and also just trying to go about our lives. I work at a nonprofit that actually represents hundreds of nonprofits around New York City and New York State that provide services for people with disabilities. We have schools, we have birth through end-of-life care. I'm sure you know that there's an unbelievable turnover. Are there things that states are doing that are helping with recruitment and retention because we can't keep enough teachers? We have dark classrooms. We have kids who are waiting for seats. These are kids with developmental disabilities. We need psychologists, we need teachers. This is really scary. When we think about people joining these careers, this is all really scary for people.

Brian Lehrer: Yes. There's already a worker shortage in those fields, you're saying, and the prospect for making it harder to get student loans or student loan repayments is going to put even more pressure on that workforce. Right?

Kate: Unbelievable.

Brian Lehrer: My last question to you as we run out of time, Annie, is if the functions of the Education Department get devolved to the states, is that going to also apply to student loans, and we're going to see 50 different state legislatures start to debate like Public Service Loan Forgiveness programs of their own and things like that?

Annie Nova: It's really hard to imagine such a huge federal portfolio being separated through the states. It's just really hard to imagine logistically. Probably there will remain some entity that does the federal student loans, be it a bank or a different federal agency. Different states have stepped up and tried to do different consumer rights for student loan borrowers or to offer their own programs. The way we fund college education right now is largely through loans. It's just, yes, hard to imagine that happening on a state level.

Brian Lehrer: We leave it there for today. A lot of great information from Annie Nova, CNBC personal finance reporter focusing on education, who's been reporting on student loans and the dismantling of the Department of Education. Listeners, thank you for all the good information that you helped share with some of our listeners who have so many concerns about this. Annie, thanks for coming on.

Annie Nova: Thanks so much, Brian.

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