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Approximately 42.7 million Americans, equivalent to 12.5% of the U.S. population, have, on average, $40,000 of student loan debt. Under the Biden Administration, student debt relief was at an all-time high, where $183.6 billion in student debt dollars was forgiven via existing programs, such as the Public Service Loan Forgiveness (PSLF), Borrower Defense to Repayment, and the Total and Permanent Disability Discharge initiatives, benefiting over 5 million borrowers. This accomplishment surpassed all the efforts of previous administrations combined, even though the Supreme Court blocked President Biden’s Student Loan Forgiveness Program in 2023.
As we transition to President Trump’s administration, significant changes to federal student loan policies are anticipated. During his previous tenure, President Trump proposed limitations regarding income-driven repayment plans, eliminating Public Service Loan Forgiveness, and cutting federal funding for student aid initiatives. His current plans for student debt in this new term are still unclear; however, it’s clear that they will not be analogous to those of the Biden Administration.
The potential dismantling of the U.S. Department of Education
Congress established the U.S. Department of Education through the Department of Education Organization Act in 1979. The department's primary purpose is to ensure that all students have access to a quality education by providing resources such as financial aid, civil law enforcement, grants, and more. President Donald Trump’s administration intends to dismantle the department. If enacted, the department's functions would be redistributed to other federal agencies or state governments, which may impact the management of federal student aid programs and initiatives.
What might change?
Federal Loan Processing Agencies & Forgiveness Programs
If federal student loan management is redistributed to the states, there may be great variance regarding their regulations, such as loan repayment terms, forgiveness programs, and interest rates. The PSLF, DoE’s Office of Federal Student Aid (FSA), and income-driven repayment plans depend on federal oversight; however, President Trump’s administration has expressed intentions to reverse these student debt relief initiatives that previous administrations implemented.
Future Student Aid
The DoE oversees roughly $1.6 trillion in total student loan debt and administers over $120 billion annually in grants, study funds, and loans to support nearly 10 million students nationwide and 44 million current borrowers. The bestowment of power to the states may disrupt these programs, leading to administrative challenges and potential delays in total aid distribution. Some select states may also prioritize funding for in-state students, which could limit opportunities for out-of-state applicants who may need more significant financial support.
Private Sector
Many students depend on the DoE for fair borrowing terms and financial aid. Federal student loans offer flexible repayment options, borrower protection programs, and delayed interest accrual (postponement of interest payments on a loan for a set period). If the DoE were dismantled, the management of federal student loans would likely be transferred to another agency or state government; however, students would rely more extensively on private institutions like retail banks for student loans if new federal student loans and grants are reduced. The private student loans that retail banks issue typically require credit checks and an approved co-signer, which poses an additional barrier for low-income students and those without established credit histories. Private lenders are also known for offering loans with high interest rates and low borrower protection programs, as opposed to federal student loans. The federal student loan interest rate is 6.53%, while for private institutions, on average, is 9.74%. This barrier may cause greater financial strain and students to avoid higher education.
Why is President Trump claiming to do this?
President Trump and some conservatives have expressed concerns that the DoE has been indoctrinating students with left-wing ideologies that contribute to high costs and declining academic standards. For example, the Trump administration targets initiatives such as Diversity, Equity, and Inclusion (DEI), Critical Race Theory (CRT), and gender ideology. He claims that these programs undermine national unity and promote racial discrimination and described the DoE as a “big con job.”
What does this mean for students?
The dismantling of the DoE requires congressional approval and may not occur immediately; however, it’s essential for students who depend on federal financial aid and loans to prepare in order to ensure the continuation of their education. It’s recommended that students monitor policy developments by taking note of any reputable news or legislative publications to stay updated on relevant changes affecting financial support.
Additionally, exploring alternative financial aid options, such as institutional scholarships and grants, private scholarships, and state-based aid programs, can benefit students. Many colleges and universities offer scholarships and grants that are available by contacting your institution’s financial aid office. Private organizations also offer scholarships based on criteria such as field of study, academic achievement, etc. Websites such as Fastweb and Scholarships.com can act as great resources for scholarships that match your profile. Assessing and planning your educational expenses is an excellent way for students to ensure secure funding and minimize roadblocks in pursuing higher education.