American student loan debt is sky-high, with some estimates putting the total number over $2.19 trillion—that’s higher than all U.S. credit card and auto loan debt combined.
President Joe Biden and his administration made numerous attempts to alleviate the burden of student loans, including an executive action that would have canceled student loans for 43 million borrowers. But in the end, these efforts did not have the major impact many had hoped for.
Instead, Biden took smaller steps that eventually helped over 5 million Americans trim their student debt. In the waning days of his presidency, borrowers with disabilities, who attended schools that cheated and defrauded their students, and public service workers had their loans forgiven. In total, over $183 billion in relief was provided.
“Since Day One of my administration, I promised to ensure higher-education is a ticket to the middle class, not a barrier to opportunity, and I’m proud to say we have forgiven more student loan debt than any other administration in history,” Biden said in a press release.
Today, borrowers are staring down a new administration with an avowed populist agenda—things like cancelling the tax on tips and reducing the price of eggs. But few expect the Trump administration to be very forgiving when it comes to college students and their six-figure loan balances.
It’s still early, but President Donald Trump has hinted at cancelling the Public Service Loan Forgiveness program or even the entire Department of Education.
“We are concerned about ways that there could be a deconstruction of the ability for the Department of Ed to do its work, including the administration of the Title IV programs, including student loans,” says Yolanda Watson Spiva, president of Complete College America.
While the possibilities could be monumental, experts say borrowers do not need to sound the alarm bells yet since uncertainty remains. Here’s what borrowers need to know—and do right now.
It’s not time to panic about student debt issues—yet
When it comes to loans, students and borrowers shouldn’t panic yet, says Betsy Mayotte, president of The Institute of Student Loan Advisors, an organization that provides free student loan advice to borrowers. While many borrowers are worried about potential changes, it is still early in the new administration, and little to no guidance has been provided, she adds.
If the Department of Education is dismantled, which Mayotte and Watson Spiva both say is unlikely since it would require an act of Congress, current federal student loans won’t be majorly impacted. Loans would just transfer hands, and the terms and conditions would not change.
Congress has also never removed benefits from existing student loans, she adds, meaning any changes to the system will apply to those after any law is enacted.
“We should be vigilant, but not to the point where we're hyper-focused on the very extreme types of activities that could happen,” says Watson Spiva.
Check on your current loans, make payments and set aside money if you’re on forbearance
The student loan ecosystem is complicated, and as a result, each borrower may have a different payment schedule and conditions. Borrowers who may have been lax about checking in on their loans during the Biden administration should sign into their loan portal and check their status as soon as possible.
About 8 million federal student loan borrowers are enrolled in the Saving on a Valuable Education (SAVE) plan, which is an income-driven repayment process. However, lawsuits paused the program and its loans, meaning borrowers do not have monthly payments, and no interest is being accumulated.
For those in forbearance, Watson Spiva says individuals should continue to set aside money so that when payments resume, they can be met, but she admits that’s easier said than done.
“That’s a great recommendation if people have the money, right? I think what we were hearing from borrowers that they didn't have it at that time to pay it back, and that's why the considerations were being made for ways to either reduce or eliminate the loans in the first place,” she says.
While Mayotte says she has received many questions from SAVE borrowers about whether to switch plans or stay in forbearance, there’s no perfect answer due to it being held up in the court system. The forbearance could last well into 2025.
For those in default, contact your loan provider ASAP
Due to the COVID-19 pandemic, penalties for missing student loan payments and forced collection of defaulted loans have been paused for five years. They are expected to restart as early as this month, meaning borrowers could have their wages, tax refunds, Social Security, and other federal benefits seized.
Mayotte says anyone with a defaulted loan should try to contact their loan holder to resolve the default by rehabilitation or consolidation to prevent any major financial upheaval.
Recognize the importance of higher education, and save if you can
Despite uncertainty when it comes to student loans and the federal government’s view on education, both Watson Spiva and Mayotte encourage people to recognize that higher education is invaluable to American society.
“If we're trying to have an educated citizenry and people who are participants in the knowledge economy, then we're going to need to have more people who are participating in post-secondary education, which means many of them to afford to go to college are going to have to take out student loans,” Watson Spiva tells Fortune.
The conversation around many Americans not being able to make ends meet and living paycheck to paycheck needs to go beyond discussing the price of eggs, she adds. The price of college needs to be part of the conversation. If not, it may deter students from pursuing the American Dream.
“There's a narrative that has been brewing that college is reserved for the elite and that this is sort of a luxury good, as opposed to the real conversation about the fact that we know over 70% of jobs currently do or will require a college degree,” Watson Spiva adds.
And it’s not just about the degree itself—the skills learned in post-secondary education, like critical thinking and communication, are the foundation of any successful career, she adds. Learning opportunities can take place in a variety of forms, she notes, including community college, trade school, and other forms outside of the traditional 4-year college mold.
In the U.S., the average public university student borrows about $31,960 to attain a bachelor’s degree, according to the Education Data Initiative. For some borrowers, student loans can take decades to pay off. That can even stretch into retirement years.
Planning, therefore, can make or break your or your children’s educational future. Here are three ways items you should consider sooner rather than later if paying for college is in your financial future:
- 529 plans: a tax-advantaged savings account
- Education Savings Accounts: a savings account that while has an annual contribution limit per child, is allowed to be placed into any investment
- Scholarships and grants: there are a plateau of opportunities from universities, nonprofits, community organizations, and more that can provide thousands of dollars in student aid
“Pay attention to what Congress is doing,” Mayotte says. “Educate yourself for what your options are now. Know that you know historically, no changes have ever been made retroactively, so it's unlikely that borrowers are going to lose, other than the SAVE plan, existing benefits. Just take a deep breath and vote accordingly."
