Student-loan borrowers and parents are facing spiking payments and fewer options for relief, a new report says
Trump's student-loan repayment overhaul would increase payments by thousands of dollars, a new report from the Center for American Progress finds.
Student-loan borrowers and parents are bracing for higher payments and fewer relief options, according to a new report. The Center for American Progress (CAP) released the report, detailing the impacts of President Donald Trump's student-loan repayment overhaul signed into law in 2021. The changes took effect on July 1 and include new income-driven repayment plans and borrowing caps.
The report predicts an average annual increase of over $2,000 for borrowers transitioning from the Biden-era SAVE plan to the new Repayment Assistance Plan (RAP). For instance, a typical borrower with a bachelor's degree earning $68,615 annually would see their monthly payments jump from $136 to $343, a total annual increase of $2,482. This is based on income data from the US Census Bureau and adjusted for inflation using the consumer price index.
The report highlights the financial strain on borrowers, making them more susceptible to defaulting on their debt. With no grace period, borrowers must make on-time payments to receive RAP benefits, which are more expensive than SAVE's zero-dollar monthly payments.
The changes also limit parents' borrowing options, capping their loans at $65,000 and removing the income-contingent repayment plan. This, combined with higher payments and the elimination of deferment options during economic hardship, increases the risk of default. Defaulting on federal student loans can result in wage garnishment and the seizure of federal benefits like Social Security.
The CAP report suggests that Trump's changes aim to simplify a complex repayment system and prevent excessive borrowing. However, the report warns that the new system could lead to higher default rates and severe financial consequences for borrowers.
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