There’s been a lot of uncertainty since the election regarding what the Trump administration and the Republican-controlled Congress may have in mind for student loan borrowers. During the past few weeks, I’ve been carefully watching public statements, investigating proposed appointments, and speaking with other advocates and experts. While everything at this point is still speculation, I think we’re beginning to see some clues as to where student loan reform may be going in the next few years, and who may be most at risk from potential negative consequences.
Graduate student borrowers have been the target of fiscal conservatives for quite some time already. In short, graduate school education is expensive, and historically it has been a luxury. Of course, the situation is a bit more complex than that, as many employers increasingly require or prefer applicants with a Master’s or professional degree for middle class jobs.
However, there was explosive news in higher education this week, as the Dept. of Education revealed that the cost of income-driven repayment plans and loan forgiveness programs for borrowers with federal Graduate PLUS loans may be far higher than initial projections. Some journalists have rejected these conclusions, but I don’t think that matters – the dominant narrative right now is that graduate students are an expensive (and therefore expendable) component of the higher education financing system. I expect the Graduate PLUS loan program to be trimmed or even eliminated, and we might see restrictions imposed on access to income-driven repayment and profession-based loan forgiveness programs for Graduate PLUS borrowers. Even the Obama administration targeted graduate students by imposing a longer repayment term for graduate loans under the new REPAYE plan, and by proposing a cap on Public Service Loan Forgiveness (although that never became reality). So it’s not that much of a stretch to expect the Trump administration and Congressional Republicans to do the same, and maybe go further.
It’s too soon to say for sure, and too early to know what specific changes might be coming – but the discussions happening in Washington indicate that graduate students will likely be targeted.
Students at For-Profit Schools
Trump surrogates and their congressional allies have made statements indicating that they disagree with the Obama administration’s tough approach towards for-profit schools, which arguably resulted in the recent closure of ITT Technical Institute. Trump and his transition team have also promised to generally roll back many of Obama’s executive orders and regulations.
Taking all of this in, I think we will see a gutting or repeal of recently-finalized rules providing student loan forgiveness and relief to borrowers defrauded by for-profit schools, as well as older regulations requiring for-profit schools to provide gainful employment opportunities to their students or risk losing access to federal financial aid.
Student loan borrower advocates have been struggling to keep programs like Perkins loans and federal PELL grants alive in recent years. These programs provide low-interest loans or grants to borrowers with high financial need. While they are usually not enough to cover the entire cost of a college education, these programs can go a long way to making college affordable. But Perkins loans and PELL grants have not kept up with the rapid increases in college tuition, and they have faced the real possibility of being gutted or eliminated entirely, rather than being funded more fully. These programs may be even more at risk in the coming years.
Borrowers With Disputes
The federal student loan system is notorious for problems with servicing and debt collection. In recent years, however, borrowers have had some options to address errors and disputes. The U.S. Dept. of Education has an internal Ombudsman unit dedicated to resolving disputes between borrowers and loan holders. And the Consumer Financial Protection Bureau (CFPB) has been handling similar disputes while also aggressively holding student loan servicers and debt collection agencies accountable through reporting and legal action. But the CFPB is a likely target of Congressional Republicans. The fate of the Ombudsman unit is a bit less clear, and it may depend overall on reallocation of funding to the U.S. Dept. of Education. However, with less federal oversight and fewer federal actions to rein in bad behavior, student loan borrowers and their advocates will likely have to take a more decentralized approach.
I expect there to be a greater reliance on state attorneys general (like the recent action by the Massachusetts Attorney General against ACS), and on private individual legal action through state consumer protection laws, which unfortunately vary significantly in strength and effectiveness from state to state.