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2d ago

Trump Administration Reshapes Federal Student Loan System with Renewed Collections and Structural Overhaul

Collections have resumed for defaulted borrowers, income-driven repayment applications reopened, and major policy reforms are underway as the Department of Education faces dissolution.

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FILE - The U.S. Department of Education building is seen in Washington, Dec. 3, 2024. (AP Photo/Jose Luis Magana, File)

Overview

  • Federal student loan collections resumed on May 5, 2025, reinstating wage garnishment, tax refund seizures, and benefit offsets for borrowers in default.
  • Applications for income-driven repayment plans reopened on May 10, 2025, following a court-ordered pause earlier this year, though processing delays persist.
  • President Trump signed executive orders to dissolve the Department of Education, transferring student loan management to the Small Business Administration, raising concerns about administrative capacity.
  • The proposed Student Success and Taxpayer Savings Plan, backed by Congressional Republicans, aims to simplify repayment options, extend forgiveness terms to 30 years, and eliminate certain Public Service Loan Forgiveness provisions starting July 2026.
  • Borrowers enrolled in the SAVE plan remain in administrative forbearance due to ongoing litigation, with no payments required and no interest accruing.