Many administrative and regulatory changes implemented by the Trump administration have added uncertainty to the lives of millions of borrowers, who have already been the targets of long-standing criticism and controversy about the US student loan system. Despite the fact that some of the changes were intended to save government spending and speed up processes, many borrowers complained about being confused and annoyed by the new laws and restrictions.
What follows is a discussion of the specific policies put into place by the Trump administration regarding student loans, including how these changes affected repayment and forgiveness programs, how they perplexed borrowers, and what the future holds for American student debt.
Making an Already Difficult System Even More So
Before talking about the changes made under Trump’s administration, it’s important to have a handle on the complicated American student loan system. With so many different loan programs, repayment schedules (standard, income-driven, graduated), and servicers to deal with, even seasoned borrowers might feel overwhelmed.
Throughout the Trump administration (2017–2021), Secretary Betsy DeVos oversaw many major changes at the Department of Education. Some were portrayed as necessary revisions, while others were condemned for being unclear and having an impact on borrower protections.
Obama-Era Protections Eliminated
Removing protections for student loans that were in place under the Obama administration was a major and contentious decision by the Trump administration.
Weak Borrower Protection Against Repayment
Students who fell victim to university scams, especially at for-profit institutions, may be eligible for federal student loan forgiveness thanks to a provision passed during Obama’s administration known as the Borrower Defense to Repayment. Debtors’ eligibility for relief was made more difficult in 2019 when the rule was amended by the Trump administration. In line with the new provision:
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Lenders must prove not only dishonesty but also monetary loss.
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Due to the individual assessment of each claim, processing time increased.
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It was common to provide just partial relief, even in cases of obvious deceit.
There was a lot of confusion and anger because many borrowers who believed they could get their loans forgiven were either denied or left hanging for months or even years.
Changes to the Public Service Loan Forgiveness Program (PSLF)
The program that allows government employees to have their remaining student loans forgiven after 120 qualifying payments has also been affected. Despite widespread condemnation, the Trump administration chose not to terminate the program.
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Thousands of debtors were denied forgiveness due to technicalities, such as being on the wrong repayment plan.
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The Temporary Expanded PSLF (TEPSLF) program attempted to solve some of these issues, but it was difficult to obtain and had confusing instructions.
In response to these difficulties, the government was said to have undermined PSLF without formally dismantling it.
Service Provider Monitoring and Responsibility
The Trump administration also made major changes to the regulation of federal loan servicers.
During Betsy DeVos’s tenure as education secretary, the department made fewer efforts to hold servicers accountable. Officials from the department of:
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ceased collaborating with the CFPB in their investigation of servicer misconduct.
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decertified student loan servicers as required by Obama-era regulations.
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extended contracts to servicers with a history of borrower complaints, such as Navient and FedLoan.
This led borrowers astray or left them in the dark regarding their options for repayment, whether they qualified for forgiveness, and the ins and outs of forbearance. Instead of more affordable income-driven repayment (IDR) plans, many people said they were steered into costly forbearance programs because there wasn’t enough oversight.
Plans for Repayment Based on Earned Income
The Trump administration also proposed significant changes to income-driven repayment (IDR) programs.
Despite not being officially signed into law, the government suggested merging the four existing IDR options into one that:
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A higher percentage of discretionary income (12.5% vs. other plans) is used to cap payments.
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Graduate borrowers had their remaining balances forgiven after 30 years, while undergraduate borrowers were given 15 years to pay it off.
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The benefits of tax forgiveness were removed.
Despite never being implemented, these plans caused confusion and alarm among borrowers who were unsure of their future eligibility or repayment requirements. Because they didn’t know what to do next, many people delayed making decisions about refinancing or consolidating.
Emergency Waiver and the COVID-19 Pandemic
The COVID-19 pandemic forced the Trump administration to act swiftly in early 2020 to address student loans. In March of 2020, President Trump signed the CARES Act into law, which included:
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Payback of federal student loans has been put on hold.
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0% interest is charged on loans that qualify.
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halted loan default collections.
This assistance was initially scheduled to expire in September 2020, but it was extended many times with no warning, placing debtors in a precarious situation.
Furthermore, there was a lot of misunderstanding since there was no clear advice on how the forbearance period would impact debt forgiveness, particularly for PSLF and IDR programs. Many borrowers got conflicting instructions from their servicers, and they were unclear whether stopped months were considered forgiving.
Breakdown in Communication
Ineffective communication was a recurrent problem in the Trump administration’s approach to student loan management. Frequently, announcements of policy rollbacks, regulatory modifications, and altering enforcement requirements were made without enough borrower outreach or justification.
Servicers, who are usually the primary point of contact for borrowers, were left to decipher complicated regulations, which often resulted in:
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Information given to borrowers was inconsistent.
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missed due dates or requests for forgiveness that are not eligible.
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borrowers choosing expensive or unfavorable repayment schemes.
Many people were disillusioned with the promise of federal student assistance as a result of this atmosphere of ambiguity and disinformation, which also damaged faith in the system.
Effect on Debtors
Confusion and fear among borrowers escalated as a consequence of these alterations. Many argued that rather than the system becoming less opaque, it was become more so. Important ramifications included:
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fewer PSLF and Borrower Defense applications as they were deemed to be worthless.
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Those who are uninformed about their repayment duties are at a greater risk of default.
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financial decisions that are postponed due of student loan worries, such as buying a home or establishing a family.
In addition, state attorneys general and advocacy groups sued the Department of Education, saying that it failed to shield borrowers against misleading practices and unjustly delayed claim processing.
In the Future: What Has Changed Since Trump?
Some of the Trump-era policies began to be undone in 2021 with the election of the Biden administration. For instance:
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A more borrower-friendly version of the Borrower Defense regulation was revived.
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Wide-ranging debt forgiveness initiatives, including special help for duped students and PSLF members, were implemented by the Biden administration.
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More tighter regulation of loan servicers was introduced, coupled with a renewed engagement with the CFPB.
Nonetheless, the ramifications of the Trump administration’s actions are still being felt in the long term. The student loan system is still not universally trusted, and many borrowers are still wary.
Concluding Remarks
By weakening protections, lowering monitoring, and imposing complicated processes, the Trump administration’s revisions to student loans left consumers bewildered. A more convoluted and unfriendly lending climate was the eventual effect, regardless of whether any of the changes were a component of broader efforts to overhaul the budget.
While conversations about educational reform and the reduction of student debt continue, the actions of the Trump administration highlight the need of establishing a system based on transparency, accountability, and clarity.