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2d ago

Trump Administration Reshapes Student Loan System with New Policies and Department Overhaul

Federal loan collections resume following a five-year pause as sweeping reforms, including the dissolution of the Department of Education, create uncertainty for borrowers.

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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)
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Overview

  • Federal student loan collections restarted on May 5, 2025, ending the pandemic-era payment pause and subjecting millions of defaulted borrowers to wage garnishment and benefit reductions.
  • The Trump administration introduced the Student Success and Taxpayer Savings Plan, which restructures repayment options into a flat-payment plan and an income-based Refund Assistance Plan (RAP).
  • An executive order was signed to dissolve the Department of Education, shifting loan management to the Small Business Administration and other programs to the Department of Health and Human Services.
  • Applications for income-driven repayment plans reopened on May 10 after a court injunction paused them, though processing delays persist due to administrative disruptions.
  • Defaulted borrowers can avoid garnishment through loan rehabilitation, consolidation, or bankruptcy, but these options require significant time and effort to implement.