GOP Forcing Eight Million Student Loan Borrowers Into Repayment
Workers who had been repaying their student loans via President Joe Biden’s Saving on a Valuable Education (SAVE) program are looking down the barrel of an even more difficult 2026 than expected. The program is likely ending, the Trump administration announced last week, so those who were enrolled must switch to a new plan, any of which will increase their monthly payments.
SAVE is an income-driven student loan repayment program mandated by statute and consistent with what five presidents had instituted for over three decades without any legal challenges. It expedited loan forgiveness and allowed low-income borrowers to make monthly payments as little as $0. That was too generous for attorneys general in Arkansas, Florida, Georgia, Ohio, Oklahoma, Missouri, and North Dakota, who together sued last July.
More from Whitney Curry Wimbish
Trump’s One Big Beautiful Bill Act would have eliminated SAVE and three other income-driven repayment programs, forcing borrowers to change plans by July 1, 2028. But a deal Trump cut with the red-state attorneys general will move that kill date up if a judge approves the settlement terms, which will force nearly eight million borrowers into an untimely repayment.
“This is a policy choice by the Trump administration to make it worse for everybody, and we’re all going to pay the price,” said Mike Pierce, co-founder and executive director of Protect Borrowers and a former Consumer Financial Protection Bureau regulator who was the higher-education lead subject matter expert.
The end of SAVE comes as Republican policy choices are increasing costs across the board. Trump’s international tariff program, which recently required taxpayers to bail out farmers for $12 billion, has raised prices on imported goods, while the end of enhanced subsidies for health insurance on Affordable Care Act marketplaces will cause switches to plans with less coverage or dropping insurance entirely, as the Prospect recently reported.
New burdens on student loan borrowers have gotten less attention, but they add to affordability pressures for millions of Americans.
Some borrowers said having to make student loan payments now would require that they take a second job. One nonprofit worker shared their story on condition of anonymity. SAVE allowed them to make no monthly payments on $21,000 in federal student loan debt, they said, though they still paid $10 a month because paying nothing “sounded weird.” Plus, someone at student aid advised them years ago that paying a little bit was a good practice, so they didn’t want to encounter “some bureaucratic thing” years later where they actually were required to make small payments. But then the servicer changed three times and more advice was not forthcoming.
SAVE allowed this borrower to focus on repaying the $20,000 in other educational loans they took out from private lenders, medical debt, and other bills. Switching repayment plans won’t take those costs into account, so their finances will generally be more stressed next year as they try to pay it all off at the same time.
“I’ll have to drive more Lyft for extra money and look for more side gigs,” they said.
Others will look to cut back on spending, like Sean Lynch, an attorney in California who runs a law firm with his brothers. He had been paying $600 a month under the SAVE program on his law school loan, which is now around $340,000.
“It started at $280,000, but there’s no way to keep up with it,” Lynch said. “The interest is accumulating. I’m not someone who is ever going to reasonably pay it off between now and my forgiveness, which is at the 25-year mark.”
Lynch is expecting that monthly payments will probably double to $1,200 under another income-driven plan, which will strain his household finances, and that he may also face a massive “tax bomb” because of a federal income tax liability change in Trump’s One Big Beautiful Bill Act. “If I owe $500,000 at the 25-year mark, it will be as if I made $500,000 that year and that will suck,” he said. Lynch has already stopped contributing to his 401(k) retirement plan so that he and his wife can cover the more than $2,000 monthly charge of child care for their 20-month-old.
“My whole perspective on student loans is, I understand I took out a loan. I understand I have to pay back a loan. But I would prefer if the whole scheme was less punitive,” Lynch said. “It doesn’t make much sense that the federal government is trying to make this a moneymaking endeavor.”
In many cases, borrowers have paid back much or all of the total cost of their loans but continue to see balances rise because of accrued interest. It’s unclear what public-policy goal the government has for setting rates so high and punishing people for getting an education. “I would become a single-issue voter on student loans if I had to,” Lynch said. As an older millennial who owns his own home, Lynch said he considers himself lucky and expects he will be able to cope with new repayment terms. But he’s worried others won’t.
“There are going to be a lot of people selling houses, cashing in retirements because their tax burden is going to be massive,” he said, adding that younger people might not have those to fall back on and that student loans can’t be discharged in bankruptcy.
“If you were totally screwed before now,” he said, “you’re super screwed after.”
FORCING 7.7 MILLION PEOPLE INTO REPAYMENT will hurt the entire American economy, according to the California Policy Lab. Already, borrowers are struggling to pay, the group said, with about a quarter in delinquency, deferment, or forbearance. Based on that rate, it’s likely that ending SAVE will mean two million more people delinquent on their repayments. New policies instituted by the Education Department will aggressively attempt to collect on those delinquencies, including by garnishing upcoming tax refunds and other federal benefit payments, or even worker wages.
“Practically speaking, a lot of these folks have other bills. It’s not just their student loans that they’re worrying about. They’re choosing between making their rent payments and their utility bills,” said Evan White, co-founder and executive director of the California Policy Lab’s UC Berkeley site and one of the research team members running the California Credit Dashboard.
“Financial health-wise people were doing quite well in 2020, 2021, on average,” White added. “It’s slowly deteriorated to pre-pandemic norms and then it got worse, and for the past year or so it’s been as bad as it’s been at any point during the Great Recession.”
Student loans are often the first type of debt people stop repaying when they’re under financial pressure, White said, adding that more people are maxing out their credit cards, a sign that households don’t have enough money to cover the cost of living.
“What we see in our data is that financial health is deteriorating on average across a lot of different indicators, and that should be worrisome because it may be a signal that we could slip into a recession soon,” White said.
The end of the SAVE program safety net will be “absolutely catastrophic for millions of people who don’t have a way to make ends meet,” said Pierce, from Protect Borrowers. More people are falling behind on loans of all kinds, such as car loan delinquencies, which were at an all-time high as of last month.
Changing the terms of a loan repayment plan also diminishes trust in the government, Pierce said. Borrowers made life choices based on the federal government’s promises that they would have loan balances forgiven if they played by the rules. “It makes people feel ripped off,” he said. Up until now, the right has taken advantage of that distrust, he added, but now they’re the ones in charge. “I don’t know if they’re going to be able to use that trick again.”
“I think you’re going to get people camping out. It’s hard to imagine this does not cause mass disruption in our electoral politics as a result,” Pierce said.
Borrowers who shared their stories with the Prospect about SAVE included some whose lives the program improved.
One person, who shared their story anonymously via text, had been working to pay off $10,000 in credit card debt in 2021 and 2022, but still had about $6,000 in student loan debt “staring me in the face.” When the government forgave it under SAVE, they pulled up their net worth chart on the budgeting app YNAB (short for “You Need a Budget”) “and nearly cried seeing it cross the 0 mark,” they said. “And I could finally see saving for a house as a reasonable goal.”
The post GOP Forcing Eight Million Student Loan Borrowers Into Repayment appeared first on The American Prospect.