The Future of Student Loans in Trump’s Presidency
Education Policy Brief #203 | Naja Barnes | June 4 , 2025
Since Trump’s attack on the Department of Education, there has been some confusion surrounding the future of student loans. During the Biden Administration, there were discussions on a $20,000 loan forgiveness plan for each borrower, but that has since been struck down by the Supreme Court. Since then, there have been no discussed plans of mass loan forgiveness, but instead, mandatory loan repayments will be enacted.
The U.S. Department of Education has not collected defaults since 2020, during the pandemic. However, on May 5th, 2025, the Department resumed collections on defaulted student loans. Confusion has again begun to rise as discussions on loan repayment become more frequent, surrounding: Who will have to repay come May 5th, what is the default status on student loans, what will the effects be, and what are the different statuses of student loans?
Analysis
May 5th, 2025, was the start of the mandatory collection of defaulted student loans. If a borrower misses a payment, they are delinquent, but if a borrower has not made a payment for 270 days (120 days for private loans), they would be considered in default. Being in default with student loans could affect other aspects of a borrower’s life, such as their credit score and wages. There are options to help avoid automatic deductions from wages for a borrower in default. One option is a referral to a federal debt collection service, another is to make payments and to reach out to federal debt relief programs to arrange a payment plan. If none of those options are chosen by a borrower in default, involuntary collections are made through garnished wages.
How often borrowers make payments depends on how borrowers choose to repay their defaulted loans. An option is to pay the defaulted loan in full. However, the two main ways to get out of default are by loan rehabilitation and loan consolidation. Loan rehabilitation is a one-time process to remove defaulted status from a borrower’s credit history. Borrowers must make nine voluntary, uninterrupted payments over 10 months. Borrowers will have to contact their loan servicer and agree in writing to make the payments. The payment amount will be set by the loan servicer, and documentation of the borrower’s income is needed. Loan consolidation allows borrowers to combine multiple federal student loans into one loan with a single monthly payment, but borrowers will have to pay any future interest on the higher balance.
Student loan borrowers in forbearance or deferment will not be held to mandatory debt collections. Being in default with student loans is different from being in a state of forbearance and deferment. Forbearance and deferment allow a borrower to temporarily suspend payments while interest still accrues, but they differ. Forbearance is a temporary pause or reduction in student loan payments due to financial hardships. Some other eligibility criteria for forbearance are serving in AmeriCorps, serving in the National Guard, or working as a teacher. Deferment is a temporary pause in loan payments due to specific circumstances such as enrolling in school, serving in the military, undergoing cancer treatment, or experiencing economic hardship. Both are temporary solutions that might give a borrower extra time to create a plan on how to repay their student loan debt.
Conclusion
Not every student loan borrower will be forced into mandatory debt collection on May 5th, 2025. Borrowers whose student loans are in default will be faced with garnished wages if they fail to pay their student loans or arrange a payment plan. Borrowers in forbearance or deferment will not be susceptible to garnished wages. However, being in forbearance or deferment is only a temporary solution, as interest most likely will continue to accrue. In any instance of default, forbearance, or deferment, the borrower will most likely still need to complete the payment of their student loans.