Keeping up with the changing landscape of student debt

As the Trump administration takes aim at higher education, withholding federal funding from colleges and universities that won’t bend to Trump’s will and squelching free speech in the process, it is also attacking student debt relief—a tool that makes college more accessible and affordable to those who might benefit most. With policies changing and threats spreading across all different aspects of student aid, the AFT held a webinar May 8 to sort it all out.

Raising loan payments

Among the most troubling changes is the limit placed on income-drive repayment, a system that adjusts a borrower’s monthly payment according to their income. President Joe Biden’s Saving on a Valuable Education Plan, known as SAVE, halved monthly loan payments tied to IDR. Now Trump has eliminated SAVE, and payments are going back up.

To add insult to injury, the Department of Education took down access to IDR applications on its website and ordered loan servicers to stop processing them. The AFT sued, and now the system is available again.

“By effectively freezing the nation’s student loan system, the new administration seems intent on making life harder for working people, including for millions of borrowers who have taken on student debt so they can go to college,” AFT President Randi Weingarten said when the suit was filed. “The AFT has fought tirelessly to make college more affordable by limiting student debt for public service workers and countless others—progress that’s now in jeopardy because of this illegal and immoral decision to deny borrowers their rights under the law.”

“We had to sue to get [them] to even put the application to apply for payment relief up on the website,” said Mike Pierce, executive director of the Student Borrower Protection Center. “[Now] it’s back online and it’s thanks to AFT.”

Threatening default, and worse

For some people, the damage had already been done. With SAVE and IDR threatened, many borrowers are panicked over how they will make monthly payments. Under SAVE, payments were set at 5 percent of the borrower’s income. Without it, payments will double or even triple.

The result will be millions of borrowers going into default on their student loans. “We expect by the end of this month, 6 million people will have had their credit damaged by the Trump administration, 8 to 10 million by the end of the year,” said Pierce.

Loan servicers are not warning their borrowers of the changes, so many learn about them through credit reporting companies, and by then it’s too late. “There are a lot of people who thought they were going to have their debt canceled,” said Pierce. Instead, it’s increased.

Rachel Dubreuil, a social studies teacher in Connecticut, was one of them. A year ago she was “within inches of the finish line” and expected to be done with her payments at the end of 2024 through Public Service Loan Forgiveness—a program that cancels any remaining student debt after a public service worker has made 10 years’ worth of payments. Instead, Dubreuil still has $88,000 of student debt left and no idea how she will manage. The Trump administration has not announced any changes to PSLF but, without IDR, the path to relief is clearly blocked. “What am I going to do if I can’t have an income-driven repayment?” asks Dubreuil. “What am I going to do if PSLF goes away?”

Dubreuil, who attended one of the AFT’s student debt clinics, decided to speak out through the union and fight to save these programs. “Individually we don’t have the resources to take the federal government on, but collectively we really are union strong and we can do this,” she said.

Indeed, the AFT made a lot of progress over the past decade and was instrumental in improving a broken student debt system. In addition to hosting debt clinics and providing guidance to help individuals address their debt, the union held bad actors accountable, reaching major settlements with loan servicers Navient and the Department of Education. PSLF improved so that more people had access to the loan relief they’d been promised, and more than 1 million teachers, police officers, firefighters and healthcare workers had their debt eliminated.

More threats to come

Now things have changed. Pierce said the government recently began garnishing people’s Social Security and tax refunds to collect outstanding student debt. Trump is threatening to garnish paychecks as well. (Pierce recommends that if a borrower gets a letter indicating their money will be “taken by force,” the best thing to do is to contact a congressional representative to untangle the mess.)

In addition to direct threats to student debt relief, the proposed reconciliation bill currently making its way through Congress slashes $330 billion in college affordability, attacking Pell grants and graduate PLUS loans, charging surplus fees and more.

“I’m not sure that we’ll be able to unwind all the chaos and confusion,” said Weingarten. “But we’re going to do everything we can to actually make the IDR plans ones that are affordable, to make sure Public Service Loan Forgiveness works.”

To watch the student debt webinar, click here.

To read personal accounts of student debt, including Rachel Dubreuil’s, click here.

[Virginia Myers]