The Trump administration has been rapidly dismantling protections for student loan borrowers, leaving millions of Americans with diminishing options as turmoil continues to rock federal student loan forgiveness and repayment programs.
In just six weeks, administration officials have effectively neutralized a key federal financial watchdog agency, cut staffing at key divisions within the U.S. Department of Education, and blocked several critical federal student loan repayment programs. More changes might be in store in the coming months. Here’s what borrowers need to know.
Federal Watchdog Agency Overseeing Student Loan Servicing And Collections Is Gutted
One of the Trump administration’s first actions was to neutralize the Consumer Financial Protection Bureau. The CFPB was created in the wake of the 2008 financial crisis to regulate the financial services industry, including student loans servicing and collections. Through a combination of regulatory enforcement actions, the agency has returned more than $21 billion in compensation to Americans since its inception, and has also operated a complaint system allowing consumers and borrowers to submit disputes, which the agency could then investigate and resolve.
The CFPB has been particularly effective in the student loan space. Some of the agency’s recent successes include an enforcement action against National College Student Loan Trusts, a collection of entities that acquired securitized private student loan debt, that could have resulted in more than $2 million in compensation to student loan borrowers. Last year, the agency reached a settlement with Navient over alleged loan servicing issues and mismanagement that could have resulted in $100 million in monetary compensation and a permanent ban on servicing federal student loans.
But the Trump administration has quickly diminished the CFPB by halting enforcement operations and firing key staff, including the Student Loan Ombudsman. Last week, the agency dropped a pending enforcement action against the Pennsylvania Higher Education Assistance Agency, a major student loan servicing entity. The CFPB had alleged that PHEAA had engaged in unlawful collections activities against borrowers whose debts had been discharged in bankruptcy.
“Russ Vought and Donald Trump sided with a lawless and corrupt student loan company at the expense of borrowers across the country—another sign that powerful financial interests are driving the capture and demolition of the federal consumer watchdog,” said Student Borrower Protection Center Executive Director Mike Pierce in a statement last week in response to the agency dropping the action against PHEAA. “This is a slap in the face to students, student loan borrowers, and working people everywhere.”
Julia Barnard, the now-former CFPB Student Loan Ombudsman, released a statement last month, saying that she and her team had “manually sifted through over 10,000 complaints, uncovering illegal conduct, identifying the most actionable cases for follow-up, and uncovering systemic and policy failures for Congress. Together, we secured the discharge of a private student loan for a borrower scammed by her school, helped a full-time caregiver and mother of a disabled son get the relief they were entitled to, and returned money to borrowers when they had unexpected or inflated amounts pulled from their accounts. We guided countless borrowers through the Kafka-esque maze of PSLF and ensured others received refunds for money they overpaid out of fear.”
“This work matters,” Barnard continued. “It’s a lifeline for borrowers and a safeguard against a system that too often fails them. Dismantling this function is unconscionable and will cost real people real money.”
Student Loan Operations Within The Department Of Education Are Reduced
The Trump administration has also taken aim at the U.S. Department of Education. According to recent reporting, more than 10% of staff within the Office of Federal Student Aid, which oversees the department’s sprawling federal student loan system, accepted buyout offers last month. This includes staff members who work in the department’s Ombudsman Group, which receives and investigates complaints submitted by student loan borrowers, as well as the unit that reviews applications for Borrower Defense to Repayment, a student loan forgiveness program for those who were misled or defrauded by their school.
And additional, more substantial cuts are likely on the way. Newly installed Secretary of Education Linda McMahon notified Department of Education employees this week to prepare for their “final mission” to implement President Trump’s directive to diminish the department. She warned employees to prepare for significant changes to staffing, budget, and operations. Trump administration officials are also considering other moves to reduce department spending and operations, including limiting the ability of student loan borrowers to submit complaints to the department, reducing call center hours and availability, and cancelling improvements to the department’s central student loan web portal.
Department Of Education Cuts Access To Key Student Loan Forgiveness And Repayment Programs
Last week, the Department of Education cut off all access to income-driven repayment programs. IDR plans allow borrowers to make payments based on a formula tied to their income and family size, with any remaining balance forgiven at the end of the IDR repayment term, which is typically 20 or 25 years. But following a new court ruling related to an ongoing legal challenge over the SAVE plan, a Biden-era IDR option designed to be more affordable, the department took down online and paper IDR applications and issued an order to student loan servicers to halt all processing. The suspension may last months.
Although the legal challenge technically is about the SAVE plan, two other income-driven plans – Income-Contingent Repayment and Pay As You Earn – have also been caught up in the litigation. And while Income-Based Repayment, or IBR, is explicitly not covered by the recent court order and is not being challenged, the department is blocking access to IBR, as well, reportedly because the department uses a combined application for all four income-driven plans.
Borrowers are already feeling the impacts. Those who are looking to enroll in income-driven plans or pursue Public Service Loan Forgiveness are unable to do so (PSLF typically requires that borrowers enroll in one of the income-driven repayment programs). Those who reach their student loan forgiveness threshold at 20 or 25 years under SAVE, ICR, or PAYE cannot receive a discharge. Borrowers who want to apply to switch to the IBR plan from SAVE or one of the other impacted income-driven plans cannot do so. And loan servicers are even reportedly blocking borrowers from recertifying their income, an annual requirement under federal law, pushing many into unaffordable alternative repayment options or costly interest-accruing forbearances. With CFPB oversight gutted and Department of Education operations already stretched to the breaking point, student loan borrowers have even fewer tools to navigate through this turmoil.
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