Federal Student Loan Repayment Restart
Federal student loan repayment restarted in October 2023 after a three-and-a-half-year pandemic pause. Approximately 40 million borrowers resumed payments after years of forbearance. The restart has been disruptive: the Biden administration's SAVE income-driven repayment plan — which would have significantly reduced monthly payments and accelerated forgiveness for lower-income borrowers — was blocked by federal courts in 2024 and remains in legal limbo.
The Trump administration has signaled it will not defend or expand Biden-era forgiveness programs and has directed the Department of Education to wind down programs like Public Service Loan Forgiveness expansions. Michigan has approximately 1.1 million federal student loan borrowers, with an average balance of around $38,000.
Timeline of Recent Changes
- COVID pause (March 2020): The CARES Act paused federal student loan payments, interest, and collections. The pause was extended repeatedly through administrations.
- Repayment restart (Oct. 2023): After the Supreme Court struck down Biden's broad forgiveness plan ($10,000–$20,000 per borrower) in June 2023, the administration restarted repayment with a 12-month "on-ramp" period of reduced consequences for missed payments.
- SAVE plan blocked: The Biden administration's SAVE income-driven repayment plan — offering lower monthly payments and faster forgiveness — was challenged in federal courts. An injunction remains in place as courts determine its legality.
- Trump administration policy: The new administration has signaled support for simpler, more traditional repayment options and skepticism of broad income-driven forgiveness programs. It has supported legislation to simplify repayment to two plans.
The Two Sides
- Student debt burdens depress homeownership, family formation, and economic participation for an entire generation
- Predatory lending by for-profit colleges and insufficient income growth since borrowing make original loan terms unfair in retrospect
- Income-driven repayment protects borrowers from catastrophic outcomes when earnings don't match expectations
- Student loan forgiveness is regressive — college graduates earn significantly more on average than non-graduates who would subsidize the relief through taxes
- Forgiveness without fixing the cost of college simply enables future borrowing at the same unsustainable pace
- Borrowers signed contracts and should be held to their terms; broad forgiveness sets unfair precedent and rewards decisions to borrow heavily
What to Watch
- SAVE plan litigation: Federal appellate court rulings on the SAVE plan's legality will determine whether millions of borrowers get lower payments or must revert to standard repayment.
- Congressional action: Any permanent changes to the student loan system require congressional action. Watch for bills to simplify repayment or limit forgiveness programs in the relevant House and Senate education committees.
- PSLF changes: Public Service Loan Forgiveness, which forgives debt after 10 years of public service employment, is under scrutiny. Changes would directly affect Michigan teachers, government workers, and nonprofit employees.