2024’s elections have reshaped the political landscape, giving Republicans control of the presidency and both chambers of Congress. With this new landscape, it’s a pivotal time to consider what the future holds for student loans and make smart choices about managing them now.
Answering Your Questions About Student Loans and Repayment Changes
1. Will President Trump Repeal PSLF?
No. Repealing PSLF would require 60 Senate votes, and it’s unlikely to gain enough bipartisan support. So, while changes may be proposed, PSLF is unlikely to be eliminated entirely.
2. What About the Department of Education?
Despite discussions about eliminating or reducing the DOE, such a move also requires Congressional approval. We may see some restructuring, but major changes are unlikely.
3. Will the SAVE Plan Be Repealed?
The real question is whether Trump will proactively repeal SAVE or wait for the courts. If the courts strike it down, we may see ICR and PAYE disappear as well. However, if Trump acts first, ICR and PAYE may remain.
4. What’s Next for Income-Based Repayment Plans?
If Trump follows his previous stance, he may propose an updated repayment plan. In 2018, he suggested payments of 12.5% of discretionary income, with undergraduates paying for 15 years and graduate students for 30 years. I would say this has a low probability of happening.
5. Should Borrowers with Forgiven Loans Worry About Repayment?
For those who’ve recently had loans forgiven, it’s unlikely they’ll be required to repay them. This group represents a small percentage of borrowers, so we don’t foresee major policy changes impacting them.
6. Should You Stay on SAVE Forbearance?
The SAVE plan forbearance is a unique opportunity for many borrowers, but it’s not for everyone. Here are scenarios where it makes sense to stay on SAVE:
- Waiting for Forgiveness: If you’re waiting to have your loans forgiven because you’ve already made the qualified number of payments, staying on SAVE is the best bet.
- Paying Off Private Loans: Utilize the 0% interest to focus on paying down private loans.
- Aggressive Payoff Strategy: Keep your federal loans in deferment with 0% interest while making aggressive payments.
- If Affording Payments is a Struggle: Stay on forbearance but begin planning now for alternative payment options.
If none of these scenarios apply, it’s time to switch to an Income-Based Repayment (IBR) plan. Prepare for a higher payment if needed, and apply to switch plans at studentaid.gov/idr.
Filing Taxes and IDR Recertification: Should You File Separately?
With the possibility of early IDR recertification, how you file taxes now is crucial. The decision to file separately may impact your payment amount significantly, so consult with an expert to make the best choice for your situation.
What to Do if You’re on PAYE Right Now
If you’re on PAYE, stay put for now. Given the ongoing court case, you’ll want to wait until we have a final decision, which will likely come by June 2025.
Is the PSLF Buyback Going Away?
If you’re close to completing PSLF, the buyback could still be an option in early 2025. For those not on track for PSLF, the buyback option is unlikely to remain.
Prepare for Upcoming Bills and Headlines
In the coming months, expect new bills proposing changes to PSLF and income-driven repayment (IDR) plans. You’ll see sensational headlines, but remember—most of these proposals won’t go far without 60 Senate votes. Instead of reacting to every headline, stay informed by subscribing here. We’ll provide straightforward updates on what matters most.
Wrapping Up: Staying Informed and Making Smart Decisions
As we’ve covered, the future of student loans is full of questions. Each person’s situation is unique, so the smartest move is to take a holistic view of your finances. Need guidance on setting up a manageable, strategic financial plan? Connect with us for a tailored approach that prepares you for both expected changes and the unexpected.
