Student loan borrowers might now have a new added stress on their plates as the GOP budget proposals appear to be squashing any and all hopes of loan forgiveness. Under Biden’s administration, there were serious talks of lowered payments and guaranteed debt relief on the table but unfortunately, these possibilities are now a thing of the past. The cherry on top is that borrowers will now have to brace themselves for the possibility of their loans becoming a potential reconciliation target.
Student loan payments potentially increasing amidst an already tough economic landscape
Exponentially rising interest rates and stagnant job markets are already proving to be massive hurdles hindering borrowers from paying off their student loans, and just when things could not seem any more bleak, the news of potential payment increases has been going around.
“We really see this as an attack on students and working families with student loan debt. We’ve seen an array of really problematic proposals that are on the table for congressional Republicans,” said Aissa Canchola Bañez, policy director for Student Borrower Protection Center.
Huge legislative packages are currently in the works with the House and the Senate. These are aimed to be used as government funding, as well as to further President Trump’s agenda. A vote on this budget reconciliation resolution could happen as soon as Tuesday and Speaker Mike Johnson (R-La.) cannot afford many defections.
More than a dozen proposals were put on the table by House Republicans according to a January memo featuring points like how to cut costs of higher education — with some proposals even showing the potential of being passed.
Just last week, the 8th U.S. Circuit Court of Appeals ruled to block the Biden-era “Saving on Valuable Education (SAVE) income-driven repayment (IDR) plan.”
What kind of payment increases are borrowers looking at?
Even though the SAVE plan was known to drop the payments of some borrowers all the way down to $0, its end will come alongside the Republicans hopes to streamline other IDR plans down to 2 options. This will be for loans that began on June 30, 2024 and savings amounting to $127.3 billion over a ten year period has been estimated by lawmakers.
As such, if the new proposals are passed, student loan borrowers may be looking at an increase that could go as high as $200 on their regular payments — as per the analysis conducted by the Institute for College Access and Success.
The House has revealed its aim of $2 trillion in spending cuts, however, there is also some conflict within the Republican party regarding this matter. On one hand, moderates in the group have raised concerns that the reconciliation package might result in changes to Medicaid, whilst others fear covering tax cuts in the bill.
Johnson shared with reporters, “There’s a couple of folks who just have lingering questions, but I think all those questions can be answered and we’ll be able to move forward.”
Additionally, the Senate also passed its own budget resolution a few days ago, however, details on higher education cuts have not been released yet.
There have also been talks of pulling back on some of the regulatory authority held by the Department of Education. This was proposed by House Republicans so as to ensure sweeping loan cancellations cannot be passed without approval from congress.
Patrick Wright, vice president for legal affairs at the Mackinac Center for Public Policy, shared that, “Our big concern with the student loan programs was it […] wasn’t done through Congress, where it wasn’t a matter where the people’s representatives had an opportunity. It was a single person in a single branch the government attempting to subvert the democratic process.”
The Biden administration was previously sued by the Mackinac Center for Public Policy after the administration forgave the student debt of 800,000 borrowers.
“My understanding is that there’s 45 million people that have student loans, which means that there’s 45 million different experiences on the process,” Wright added. “There was a law involved with these loans, and if Congress decides, in the future, going forward, that they are going to offer some sort of relief, and that’s gone through the democratic process …. but complaints based off of illegal actions taken by the previous presidential administration, those are not something that people should have been able to rely upon.”