Student Loan Payments Set to Surge Under President Trump

For most student loan borrowers, payments will go up during President Trump’s administration.But the reasons behind the rise might surprise you.This guide covers when your payments could jump, why it’s happening, and how some borrowers are in for a major shock (along with ways to mitigate the pain).Why student loan payments will rise under President Trump The single biggest reason borrowers will see higher loan payments is the delayed recertification of income-driven repayment (IDR) plans.

Most borrowers haven’t updated their information since filing their 2018 tax returns — long before the pandemic disrupted everything.To understand why, let’s take a look back.The world shut down on March 13, 2020.To have recertified an IDR payment using 2019 tax returns, a borrower would have had to meet two conditions: Their recertification date had to fall between the end of January 2020 and March 12, 2020.

They had to complete their 2019 taxes before that March 13 date.That’s a relatively small number of borrowers compared to those who were enrolled in IDR repayment plans using 2018 tax returns.Do you remember what you were earning in 2018? It’s likely substantially less than what you’re earning now.It’s quite common for borrowers to have had $0 a month payments based on when they were still in school, $300 a month payments while they were a resident physician, or $700 a month payments from when they were still earning associate pay.

Now, as payments resume, most borrowers will need to recertify using 2024 tax returns — likely reflecting much higher incomes.Will 2026 recertification dates stick? During the Biden administration, many recertification deadlines for IDR plans were repeatedly pushed back out of concern for borrowers but also due to political concerns about sending borrowers higher bills right before an election.One of the final actions taken by President Biden’s Department of Education was to delay many recertification dates for IDR plans back to 2026.It’s unlikely to stay that way, but not just because of actions that could be taken by President Trump.

In a big way, the recertification of income could be driven by what happens to the Saving on a Valuable Education (SAVE) plan.SAVE plan repeal could trigger higher payments in 2025 for two reasons Two potential changes under President Trump could accelerate recertification: Repeal of the SAVE plan.Switching to new repayment plans.First, a repeal of the SAVE plan means borrowers can only deduct 150% of the poverty line before making a payment, compared to 225% of the poverty line under SAVE.

Additionally, borrowers will not get to pay 5% of their income for undergrad debt.  Second, eliminating the SAVE plan would send all of these borrowers off of forbearance onto a new IDR repayment plan, presumably Income Based Repayment (IBR).Switching to this plan would require a mass re-certification of income for borrowers to enroll, which could mean far higher payments than before.Related: Trump Student Loan Forgiveness Changes: What Will He Do? Examples of higher payments for borrowers under Trump Administration To understand how these changes could impact borrowers, let’s look at two real-world scenarios.These examples highlight just how much student loan payments could rise under new policies — and why it’s crucial to plan ahead.

Example 1: Sylvia’s story Suppose Sylvia has $300,000 in student loans, and she was a PGY-2 resident physician when the world shut down on March 13, 2020.She had not yet filed her tax return, so her last payment on the Revised Pay As You Earn (REPAYE) plan in 2020 was based on her 2018 tax return.She only earned about $30,000 — she only worked from July to December that year since she started residency after finishing med school in 2018.Her payments before the pandemic were about $100 a month, and then she experienced the 3.5-year student loan pause, with payments starting back up in the fall of 2023.  She was put into the SAVE plan without being able to have a say.

And she didn’t mind when her payment ended up being $0 a month because of the higher poverty line used.She started earning a $250,000 a year attending salary in August 2022, and she earned her first full year of attending pay in 2023.After advancing as a clinician and surgeon, she got a big bump in her pay in 2024, and she’s expecting to earn about $300,000.Sylvia entered the SAVE plan forbearance in June 2024, and has about six years of Public Service Loan Forgiveness (PSLF) credit with about four years to go.

She doesn’t determine the student loan rules.She did as she was asked to do, and she’s paid in about $1,000 total on her student loan debt of $300,000, because that was the rational thing to do given her pursuit of the PSLF program.But when SAVE gets repealed, her payments will jump from $0 a month to about $2,300 a month.If she has a spouse and fails to file separately for taxes, that payment could be higher still.

Example 2: Elaine’s story Elaine switched to the REPAYE plan when it came out because she borrowed before the October 7, 2007, cut-off date for Pay As You Earn (PAYE) But if the REPAYE plan gets canned, her payment would increase from $2,000 to $3,000 a month under the IBR plan.This is because she qualifies only for the Old IBR version, not the new IBR version since she’s not considered a new borrower as of July 2014.How borrowers can lower their payments during Trump’s second term Borrowers can take several proactive steps to minimize payment increases: Be hyper-aware of how you file your 2024 taxes, as filing jointly could result in much higher student loan payments than filing separately.Think about potentially delaying your tax returns through filing extensions to keep your lower 2023 income as your reference point for recertification (instead of a higher 2024 income).

This is particularly important for the highest-earning professionals and for recent graduates who might have a very low taxable income year to use on their last couple of tax returns.Max out all pretax retirement accounts like 401(k)s to lower your adjusted gross income (AGI) — and your student loan payments.Be ready to make room in your budget for far higher payments than you’ve had to make in years.The good news is that there are plenty of tools to minimize payments, and when you make too much to have a viable path toward maximized forgiveness, there’s always the old-fashioned way of paying it back with a lower interest rate and a cash refinancing bonus.