It’s 2015, and the new Republican Congress will be taking up legislative business soon. Some people think that the discord and dysfunction in Washington is here to stay, since we had a divided government for several years already (and the Republican takeover of the Senate doesn’t change that). Others think that the President will be more willing to compromise on certain issues now, because he wants to leave behind a legacy in his final two years in office.

There are “whispers” of rather major student loan reforms that I have been hearing about lately. Many are simply rumors or speculation. But undoubtedly, student loans continue to be a major national issue, and they’re not going away. Both Republicans and Democrats recognize that the system isn’t working, and both parties have ideas about how to fix it (or at least mend it). I think we are going to see some big changes in the coming year or two in certain areas, and no movement in others.

Here’s my speculation (and that’s all this is- speculation):

• Student loan refinancing. Senator Warren’s bill that would have allowed borrowers to refinance their private and federal student loans at lower interest rates is dead, now that the Senate is in Republican control. I don’t think we’ll see any revised version of this.
• Re-introduction of bankruptcy protections. There is widespread agreement that it is simply too difficult for borrowers to discharge student debt in bankruptcy, but I just don’t think there is the political will to reform the bankruptcy laws in the near future.
• Expansion of loan forgiveness or discharge programs. Sorry, it’s just not going to happen, at least in the immediate future. When both sides agree that loan forgiveness programs need to be curtailed, I don’t think we’ll be seeing anything resembling an expansion of forgiveness and discharge options for borrowers.

Reforms That Are Probably On The Table

• Capping loan forgiveness under the Public Service Loan Forgiveness program. The President already proposed this in his own budget last year, and I think that Republicans would easily agree to this. My hope is that any such cap will only apply to future borrowers, not people who are currently invested in this program.
• Higher payments for higher-income earners. Right now, Income-Based Repayment and Pay-As-You-Earn are “capped” at the monthly payment amounts that a borrower would pay under a 10-year Standard payment plan. There also is an “exemption” for borrowers earning at or below 150% of the poverty limit for their family size, and that exemption exists for all borrowers in income-driven repayment. I think we will see an elimination of both the Standard payment cap and the poverty exemption for high-income earners, leading to higher monthly payments for those borrowers. The President and Republicans already seem to agree on this in principle (but what’s the definition of “high-income”?).
• Elimination of the marriage exemption. Under current law, federal student loan servicers will not consider spousal income in the calculation of monthly payments made under Income-Based Repayment and Pay-As-You-Earn if the couple files separate tax returns. Joint household income is only considered for joint filers. This can, in certain circumstances, result in a reduced monthly payment for married couples filing separately. Again, the President and Republicans already seem to agree that this exemption should be eliminated, resulting in higher payments for some married couples.

Reforms That Are Possible but Uncertain

• Mandatory income-driven repayment. There is a growing policy movement to make uncapped income-driven repayment the only available repayment plan for all student loan borrowers, and to have borrowers make their payments via automatic payroll deductions (sort of like a payroll tax). This would effectively remove federal student loan servicers from the process, protect borrowers from missing payments, and shield unemployed borrowers from default. The proposal pleases Republicans because it saves money by cutting out the bureaucratic middlemen, and it pleases Democrats because it preserves income-driven repayment and should lower default rates. But there’s many unanswered questions about how this would work, exactly (i.e., would there still be a poverty exemption? Would there still be loan forgiveness?).
• Caps on interest accrual. For some borrowers in income-driven repayment, their monthly payments are not high enough to cover accruing interest, and their balances are steadily increasing even while they make payments and stay in good standing. There are Democratic and Republican proposals to cap the amount of interest that can accrue in these situations. What this cap would look like, however, is anyone’s guess.
• “Current” vs. “Future” borrowers. The $1 trillion question, of course, is whether any reforms that actually pass will impact all borrowers (including those in repayment now), or only future borrowers. There’s just no way to know for sure. However, even some of the harsher reform proposals would allow for current borrowers in repayment to “opt in or out” and maintain access to some of the existing programs. My guess is it will be a mixed bag for borrowers currently in repayment: they will be able to opt out of some of the changes (i.e., the cap on Public Service Loan Forgiveness), but not others (i.e., the changes to income-driven repayment plans).

Stay tuned… the next couple of years should be interesting.