Millions of student loan borrowers can breathe a sigh of relief now that the Department of Education has agreed to restart some major loan forgiveness programs. The White House announced this week that it will resume processing loan forgiveness for eligible borrowers enrolled in two different income-driven repayment plans that had been put on pause.

“Quite frankly, this is huge,” Erica Sandberg, consumer finance expert at BadCredit.org, told The Post. “It will take millions of borrowers out of limbo.”

### Why Was Student Loan Forgiveness Paused?

In February, an appeals court upheld a ruling that blocked a Biden-era repayment program known as SAVE, placing loans for 8 million Americans in forbearance. The Education Department under President Trump argued that this ruling should apply to other income-driven repayment programs, such as Income-Contingent Repayment and Pay As You Earn, effectively putting those two plans on hold as well.

In response, the American Federation of Teachers—which has 1.8 million members, including teachers, healthcare employees, and public workers—sued the Trump administration to restart debt cancellation.

### What Are Income-Driven Repayment Programs?

More than 13 million Americans rely on income-driven repayment (IDR) plans for their student loans, according to the National Consumer Law Center. These plans calculate monthly payments as a percentage of borrowers’ discretionary income, typically ranging from 10% to 15%.

IDR plans usually cancel any remaining student loan debt after 20 or 25 years. Because there is no income cap to qualify, these programs are widely used by a diverse range of borrowers.

### How Will Repayment Programs Change Under Trump’s “Big, Beautiful” Bill?

The GOP’s proposed “big, beautiful” tax and spending bill is set to phase out the Income-Contingent Repayment and Pay As You Earn plans by July 1, 2028. Together, these two plans have over 2.5 million enrollees, according to estimates from higher education experts.

Additionally, millions of low- and middle-income Americans will be removed from the SAVE program. This program currently calculates monthly payments as 10%, 15%, or 20% of a borrower’s discretionary income.

Trump’s replacement program, called the Repayment Assistance Plan, will take effect in July 2026. It will determine monthly payments as a percentage between 1% and 10% of discretionary income. However, unlike the previous plans, this new plan does not have a payment cap, meaning many borrowers could end up paying a larger share of their salary toward student loans.

The Student Borrower Protection Center, a research nonprofit, warned in an analysis over the summer that a typical borrower could see their monthly student loan payments increase by hundreds of dollars under the new plan.

Under Trump’s plan, borrowers will be eligible to petition for having their remaining balance waived after 30 years, Sandberg noted. Apart from this option, the only alternative repayment method will be the standard plan, which sets fixed monthly payments designed to pay off loans over 10 to 25 years, depending on the loan amount.

“As a borrower, the highest payments will be through the standard 10-year plan,” Sandberg told The Post. It’s important to note that the standard 10-year plan does not offer any debt cancellation, as loans are paid in full by the end of the term.
https://nypost.com/2025/10/21/business/heres-what-to-know-about-trumps-new-student-loan-forgiveness-plans/