Worried about your student loans? Experts say don't panic
A sign outside the Supreme Court. As of July 1, student loans entered forbearance, suspending a program that faces Supreme Court scrutiny and leaving them in limbo, a reader writes. Credit: AP/Mariam Zuhaib
Drastic changes to federal student loan policies and the Department of Education are creating uncertainty and confusion for many borrowers, say debt advocates dealing with the aftermath.
President Donald Trump signed an executive order Thursday calling for the Department of Education be eliminated, even as the agency slashed nearly half its staff.
The Education Department also shut down applications in late February for income-driven repayment plans for student loan borrowers.
On Tuesday, the American Federation of Teachers filed a lawsuit against the Department of Education alleging the agency has denied access to affordable loan payments and blocked progress toward public service loan forgiveness.
The union, which represents 1.8 million people, filed the suit in federal court in Washington, D.C., seeking a court order to restore access to income-driven repayment plans, the only path for public service workers to benefit from loan forgiveness.
In the meantime, nearly 43 million Americans — including more than 2.3 million in New York — are faced with the questions: What just happened? And what does it mean for me?
It's unclear who will help borrowers manage their payment plans without the Department of Education, and advocates are concerned that dismantling the agency will delay bringing loan repayment programs back online, said Natalia Abrams, president and founder of the Student Debt Crisis Center.
The nonprofit has already seen an impact on student loan borrowers from the reduction in force last week, she said.
Besides the struggle that former employees may have with paying their own student loans, experts have said that the impact of DOE layoffs may show up for student loan borrowers in longer wait times and more difficulty getting help to navigate an already complicated process.
"This gives no answers to the 45 million people that they have to administer the student loan program to," Abrams said of Trump's shutdown plan. "It's barely being taken care of now."
Trump said Friday that the Small Business Administration would manage student loans instead, even as the agency simultaneously announced plans to cut 43% of its workforce.
Rep. Roger Williams (R-Texas), chairman of the House Committee on Small Business, issued a statement Friday saying: “The Small Business Administration ... will return integrity to federal student loans.”
But the move is likely to be challenged in court, said Carolina Rodriguez, director of the Education Debt Consumer Assistance Program at Community Service Society of New York, a public policy research and advocacy nonprofit.
"It's more complicated than just saying, 'You're in charge of this,' " she said. "The Small Business Administration may not be able to comply with the congressional requirements of the different programs."
The SBA, even if it had a robust staff, is also not equipped to handle the nation's $1.7 trillion student loan portfolio, she said. "To transition this into another agency that has no experience with the student lending system is going to be catastrophic."
Borrowers should remember, however, that their loan servicers — companies assigned by the government to help manage federal student loans — are still in place, she said.
"They are your direct contact," Rodriguez added. "Whatever is happening with the Department of Education ... that shouldn't change in the near future."
The quick answer: Applications for income-driven repayment plans are frozen.
That means borrowers can't apply for those plans or for recertification, which is when borrowers update information about their income, family size and residence.
A federal court in late February ordered the Department of Education to stop implementing a Biden administration repayment plan intended to create more affordable repayment options for student loan borrowers.
This has resulted in online applications for income-driven plans and online loan consolidation applications becoming temporarily unavailable, though the Education Department is still accepting paper applications for loan consolidation.
The court injunction is primarily impacting borrowers who need to recertify their plans and aren’t able to, Abrams said.
That is especially relevant for borrowers who have lost their jobs or seen a reduction in income, she said, highlighting in particular the spate of recently laid off federal workers.
Servicers have been told to freeze processing for 90 days, through May, subject to the court resuming or extending that freeze, Rodriguez said.
Long Island is both highly educated and has a higher percentage of people with student loan debt. That means more people could feel the freeze on applications for income-driven repayment plans.
Around 35% of Americans 25 and over had a bachelor's degree or higher, according to U.S. Census data from 2019-23. During the same period, 39.9% of adults 25 and older in Suffolk County and 48.7% in Nassau County possessed a bachelor's degree or higher.
In 2018, nearly 18% of Long Islanders had student loan debt with an average balance of $35,100, according to the most recent data available from the Federal Reserve Bank of New York.
At the end of 2024, around 12.5% of Americans had student loan debt — just under 43 million people, according to federal data.
Across New York, more than 2.3 million borrowers held a cumulative $90.1 billion in federal student loan debt as of Sept. 30, according to federal data. The state holds the fourth-highest student loan debt balance, after California, Texas and Florida.
“I’ve never had so many clients so worried about what’s happening,” said Susan Quigley, a financial planner based in Garden City.
Income-driven repayment plans still exist, and you should definitely keep paying that monthly bill on time, Abrams said, After three months, delinquency is reported to the , [object Object], , Log onto studentaid,gov to take screenshots of income-driven repayment (IDR) and public service loan forgiveness (PSLF) progress, Rodriguez said, and download your "My Aid Data" file, Borrowers should also download records from their loan servicers for their personal records, she said, , Borrowers can still contact their servicer to request a forbearance or deferment if they cannot afford payments, Rodriguez said, Also, "save as much as possible to build a financial cushion and keep your credit in good standing," she said, , Nothing will be solved overnight, but in the meantime, Quigley has this advice: Don't panic, Loans are contracts; so while new loans might have different terms, existing loans should not be affected by federal policy changes, she said,.
Drastic changes to federal student loan policies and the Department of Education are creating uncertainty and confusion for many borrowers, say debt advocates dealing with the aftermath.
President Donald Trump signed an executive order Thursday calling for the Department of Education be eliminated, even as the agency slashed nearly half its staff.
The Education Department also shut down applications in late February for income-driven repayment plans for student loan borrowers.
On Tuesday, the American Federation of Teachers filed a lawsuit against the Department of Education alleging the agency has denied access to affordable loan payments and blocked progress toward public service loan forgiveness.
The union, which represents 1.8 million people, filed the suit in federal court in Washington, D.C., seeking a court order to restore access to income-driven repayment plans, the only path for public service workers to benefit from loan forgiveness.
In the meantime, nearly 43 million Americans — including more than 2.3 million in New York — are faced with the questions: What just happened? And what does it mean for me?
What happens to student loans if the Department of Education is shut down?
It's unclear who will help borrowers manage their payment plans without the Department of Education, and advocates are concerned that dismantling the agency will delay bringing loan repayment programs back online, said Natalia Abrams, president and founder of the Student Debt Crisis Center.
The nonprofit has already seen an impact on student loan borrowers from the reduction in force last week, she said.
Besides the struggle that former employees may have with paying their own student loans, experts have said that the impact of DOE layoffs may show up for student loan borrowers in longer wait times and more difficulty getting help to navigate an already complicated process.
"This gives no answers to the 45 million people that they have to administer the student loan program to," Abrams said of Trump's shutdown plan. "It's barely being taken care of now."
Trump said Friday that the Small Business Administration would manage student loans instead, even as the agency simultaneously announced plans to cut 43% of its workforce.
Rep. Roger Williams (R-Texas), chairman of the House Committee on Small Business, issued a statement Friday saying: “The Small Business Administration ... will return integrity to federal student loans.”
But the move is likely to be challenged in court, said Carolina Rodriguez, director of the Education Debt Consumer Assistance Program at Community Service Society of New York, a public policy research and advocacy nonprofit.
"It's more complicated than just saying, 'You're in charge of this,' " she said. "The Small Business Administration may not be able to comply with the congressional requirements of the different programs."
The SBA, even if it had a robust staff, is also not equipped to handle the nation's $1.7 trillion student loan portfolio, she said. "To transition this into another agency that has no experience with the student lending system is going to be catastrophic."
Borrowers should remember, however, that their loan servicers — companies assigned by the government to help manage federal student loans — are still in place, she said.
"They are your direct contact," Rodriguez added. "Whatever is happening with the Department of Education ... that shouldn't change in the near future."
What's going on with student loan repayment plans?
The quick answer: Applications for income-driven repayment plans are frozen.
That means borrowers can't apply for those plans or for recertification, which is when borrowers update information about their income, family size and residence.
A federal court in late February ordered the Department of Education to stop implementing a Biden administration repayment plan intended to create more affordable repayment options for student loan borrowers.
This has resulted in online applications for income-driven plans and online loan consolidation applications becoming temporarily unavailable, though the Education Department is still accepting paper applications for loan consolidation.
The court injunction is primarily impacting borrowers who need to recertify their plans and aren’t able to, Abrams said.
That is especially relevant for borrowers who have lost their jobs or seen a reduction in income, she said, highlighting in particular the spate of recently laid off federal workers.
Servicers have been told to freeze processing for 90 days, through May, subject to the court resuming or extending that freeze, Rodriguez said.
How will this affect borrowers on Long Island?
Long Island is both highly educated and has a higher percentage of people with student loan debt. That means more people could feel the freeze on applications for income-driven repayment plans.
Around 35% of Americans 25 and over had a bachelor's degree or higher, according to U.S. Census data from 2019-23. During the same period, 39.9% of adults 25 and older in Suffolk County and 48.7% in Nassau County possessed a bachelor's degree or higher.
In 2018, nearly 18% of Long Islanders had student loan debt with an average balance of $35,100, according to the most recent data available from the Federal Reserve Bank of New York.
At the end of 2024, around 12.5% of Americans had student loan debt — just under 43 million people, according to federal data.
Across New York, more than 2.3 million borrowers held a cumulative $90.1 billion in federal student loan debt as of Sept. 30, according to federal data. The state holds the fourth-highest student loan debt balance, after California, Texas and Florida.
“I’ve never had so many clients so worried about what’s happening,” said Susan Quigley, a financial planner based in Garden City.
What should I do?
- Income-driven repayment plans still exist, and you should definitely keep paying that monthly bill on time, Abrams said. After three months, delinquency is reported to the national credit bureaus.
- Log onto studentaid.gov to take screenshots of income-driven repayment (IDR) and public service loan forgiveness (PSLF) progress, Rodriguez said, and download your "My Aid Data" file.
- Borrowers should also download records from their loan servicers for their personal records, she said.
- Borrowers can still contact their servicer to request a forbearance or deferment if they cannot afford payments, Rodriguez said.
- Also, "save as much as possible to build a financial cushion and keep your credit in good standing," she said.
- Nothing will be solved overnight, but in the meantime, Quigley has this advice: Don't panic. Loans are contracts; so while new loans might have different terms, existing loans should not be affected by federal policy changes, she said.
Brianne Ledda covers the Town of Islip for Newsday. She previously covered Southold and Greenport for The Suffolk Times and is a graduate of Stony Brook University.
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