25-03-2025
Trump order throws income-driven student loan repayment into upheaval. What to know
Uncertainty is high for millions of federal student loan borrowers wondering how their payment plans will be impacted amid disruptions in the Department of Education after President Donald Trump's executive order crafted an effort to dismantle the department.
Some borrowers on income-driven repayment plans have reported that they are unable to recertify their income because the form is no longer available to them online, a necessary step to remain on the plan. These plans base monthly payments off of a borrower's income and family size.
In one case, an attorney in Texas said her student loan payments more than quadrupled without warning after she was automatically placed on a 10-year standard repayment plan after missing the deadline to recertify her income.
'The Trump administration took the form for selecting an income-driven repayment plan offline after the appeals court enjoined the program,' student financial aid expert Mark Kantrowitz told McClatchy News.
A court injunction blocked the implementation of the Biden-era Saving on a Valuable Education (SAVE) Plan, but also called into question other parts of income-driven repayment plans, according to the Office of Federal Student Aid.
Amid reports of the missing, yet necessary form, the Office of Federal Student Aid extended the deadline to recertify income and family size to at least February 2026.
However, the announcement said, 'please allow a few weeks for this extension to occur. We will notify borrowers when this is complete.'
How were income-driven repayment plans created?
Federal student loans were first offered in 1958 under passage of the National Defense Education Act.
Seven years later, the Higher Education Act of 1965 established federal aid for lower income students, but subsequently allowed banks and private institutions to hand out government-subsidized student loans, according to Congressional Research Service.
The Student Loan Reform Act, which amended the 1965 statute, within the Omnibus Budget Reconciliation Act in 1993 was signed into law by President Bill Clinton.
This law set lower interest rates for Federal Direct Stafford Loans and Federal Direct Unsubsidized Stafford Loans beginning July 1, 1994, according to the bill, and created a variety of repayment options.
'Income contingent' repayment plans were part of this bill.
These plans base a monthly student loan payment off of a borrower's income and family size, according to the Office of Federal Student Aid. At the end of the plan's established repayment period, remaining balances can be forgiven in some cases.
Over the last three decades, there have been a variety of income-driven repayment plans offered by the Department of Education. Today, four are available, though the Saving on a Valuable Education (SAVE) Plan remains in a federal court battle.
Can Trump dismantle income-based repayment plans?
Education experts say Trump cannot use an executive order to dismantle parts of the Department of Education that were established through a congressional act.
'Dissolving the U.S. Department of Education would require an act of Congress. The FAFSA, student loans and the Federal Pell Grant are specified in statute, so President Trump cannot eliminate them or the U.S. Department of Education through an executive order,' Kantrowitz told McClatchy News in a February email.
In general, executive orders cannot nullify federal laws or rights granted in the constitution, Texas Christian University criminal justice professor Michele Meitl said in a Q&A.
In the March 20 executive order, Trump called on Secretary of Education Linda McMahon to 'take all necessary steps to facilitate the closure of the Department of Education.' The request asked the Secretary to take action to the 'maximum extent appropriate and permitted by law.'
Since then, multiple lawsuits have been filed in an effort to stop the dismantling of the department without the approval of Congress, the New York Times reported.
Trump announced that the student loan system orchestrated by the federal government will shift from the Department of Education to the Small Business Administration, Forbes reported. However, Kantrowitz said that this move still requires an act of Congress.
