The federal student loan system is a mess right now.
"Unprecedented uncertainty," says Beth Akers, a higher education researcher at the conservative-leaning American Enterprise Institute (AEI).
"Total disarray," says Michele Zampini with the left-leaning Institute for College Access and Success.
They're talking about the fact that 8 million federal student loan borrowers are waiting for the courts to decide if their repayment plan is legal at the same time another 9 million are late on their payments and may be plunging toward default. All while the federal office that oversees student loans has been cut in half and may be moving to a different federal agency.
NPR has spent the past few weeks catching up with student loan experts and asking the Trump administration for clarity on some of borrowers' biggest questions.
Here are six takeaways from our effort to clear up some of their confusion.
1. 9 million borrowers may be heading for default
When the U.S. Department of Education paused federal student loan payments at the beginning of the COVID-19 pandemic, it paused the threat of default too. And the era of leniency that followed lasted so long — nearly the entire Biden administration — that many borrowers are now being caught off-guard by the loan system's slow return to business-as-usual.
On Oct. 1, 2024, the system's master clock resumed its telltale ticking toward default for millions of borrowers who fail to make their required payments.
When a borrower goes more than 90 days without a payment, a cascade of consequences kicks in, beginning with reporting that delinquency to the national credit bureaus. Weakened credit can make it harder to do all sorts of things, including buy a car or rent a place to live.
It gets worse. After 270 days without making a payment, a borrower is considered in default, which means wages and tax refunds can be seized by the U.S. government.
Translation: Borrowers who don't pay up front still end up paying.
According to internal department data obtained by NPR, as of March 7, 4.2 million borrowers were more than 90 days late on their payments. And nearly 5 million borrowers were between one and 90 days late.
That's more than 1 in 5 of the country's roughly 43 million borrowers potentially on their way to default.
"I think we're absolutely going to see an explosion of delinquency and defaults," says Wil Del Pilar of the left-leaning EdTrust.
Scott Buchanan is the executive director of the Student Loan Servicing Alliance, which represents the companies that manage student loans for the federal government. He says many borrowers would have gone into default over the past four years but were saved by the pandemic safety net. Now, "that wave is hitting the shores all at once."
Buchanan points out that the law requires servicers to warn borrowers — repeatedly — before they plunge into default. He has a simple message: Do not ignore these warnings.
If your phone rings and the Caller ID says it's your loan servicer, Buchanan says, "We're not trying to upsell you on anything. We have no product to offer. When you see us calling, it's probably because there's a problem. You need to answer."
You might be on the verge of default and not even know it.
NPR sent the department a list of more than 10 questions related to this article, including asking it to confirm its delinquency numbers. The department responded to one question — about why borrowers haven't been able to enroll in income-driven repayment plans (see takeaway No. 3).
2. The SAVE repayment plan is as good as dead
Former President Joe Biden's Saving on a Valuable Education (SAVE) repayment plan was so generous with its payment terms and promise of forgiveness that federal courts are currently debating whether it's even legal. Before the courts put SAVE on hold, 8 million people had enrolled.
Now, these SAVE borrowers who are in legal limbo don't have to make monthly payments. But if you're a borrower hoping for someone to save SAVE, it's time for your Plan B.
"There isn't going to be a SAVE plan," says Jason Delisle, a nonpartisan higher education researcher with the Urban Institute. "It's either going down under legislation or it's going down by the judge's ruling."
Delisle and other experts tell NPR that congressional Republicans would benefit from the courts not killing SAVE because they want to kill it themselves, as part of their budget reconciliation bill. If they can use that bill to end SAVE, AEI's Akers says they can use the savings to help pay for an extension of the Trump tax cuts. If the courts end SAVE first, Republicans' legislative savings evaporate.
3. Income-driven repayment plans are finally back open
The judge's order freezing the SAVE plan has raised legal questions about the department's other income-driven repayment plans: Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR).
The online form to enroll in these plans was removed from the Education Department's website more than a month ago, which means borrowers haven't been able to enroll in them.
Without access to any of the department's income-driven plans, "essentially, the system has frozen in time," says Zampini with the Institute for College Access and Success.
In a Wednesday statement, the department told NPR: "The Department is working to ensure these [IDR] programs conform with the 8th Circuit's ruling."
The online form was restored soon after on Wednesday.
The monthlong lapse caused headaches for borrowers who were already in an income-driven plan and had been asked to recertify their income, which they couldn't do while the enrollment form was down. This led to horror stories of rising monthly payments.
One borrower in Austin, Texas, told member station KUT that she saw her monthly payments more than quadruple because she couldn't recertify her income.
Scott Buchanan, with the Student Loan Servicing Alliance, says there's nothing nefarious behind the Trump administration's freeze.
"Biden took [the enrollment form] down [too]. And again, not because of some malintent on the policy. It's just a practical issue." The form needed to be changed because of the court ruling and that takes time, Buchanan says.
4. Public Service Loan Forgiveness remains unchanged for now
The Public Service Loan Forgiveness Program (PSLF), which promises student loan forgiveness for any borrower who works 10 years in public service, was created by an act of Congress and only an act of Congress can shut it down.
The Trump administration recently issued an executive action calling for restrictions on who qualifies for PSLF. The plan is to exclude borrowers who work for organizations "that engage in activities that have a substantial illegal purpose," including:
Violating federal immigration law; "supporting terrorism"; "the trafficking of children to so-called transgender sanctuary States for purposes of emancipation from their lawful parents"; "engaging in a pattern of aiding and abetting illegal discrimination"; or violating state laws against "trespassing, disorderly conduct, public nuisance, vandalism, and obstruction of highways."
Many Republicans argue that the Biden administration went too far in expanding who qualifies for PSLF and that the Trump administration is justified in imposing limits. These changes cannot be implemented immediately, though, and will need to go through a rulemaking process.
In the meantime, the Federal Student Aid website makes clear, "There are no changes to PSLF currently, and borrowers do not need to take any action."
Borrowers in the SAVE legal limbo should know that the months they're spending in an administrative forbearance, not making payments, will not count toward PSLF.
5. There's likely more confusion ahead
The amount of complexity in the loan program right now, given the legal battles and change in administrations, has made the program even harder for borrowers to understand, says Urban Institute's Delisle. "I mean, it's hard for me to understand what's happening."
And AEI's Akers says "there's just this sort of overload of information that these changes are happening and maybe no specific sense of how it's going to affect [borrowers]."
Soon, it may be even harder for borrowers to get their questions answered.
The office of Federal Student Aid, or FSA, which oversees the entire federal student loan portfolio, has been cut in half by recent Trump administration efforts to shrink the government. The experts NPR spoke with generally agreed those cuts will eventually complicate borrowers' lives.
According to recent internal FSA data obtained by NPR — data that was also shared with select members of Congress — the five major loan servicers have been doing a pretty good job over the past year of answering their phones when borrowers have questions — with one exception.
MOHELA took an average of 2 hours and 24 minutes to answer borrowers' calls. The other four servicers all averaged answer times under 6 minutes. Not surprisingly, just over half of borrowers who called MOHELA with questions gave up before getting through.
In a statement, a MOHELA spokesperson explained that the servicer's complex portfolio "has disproportionately more borrowers working toward Public Service Loan Forgiveness, more borrowers are on the SAVE repayment plan, as well as other income-driven repayment plans, and more borrowers are in repayment." And that, MOHELA says, means more questions.
"Further, [this data] represents a small snapshot in time, and MOHELA has a long track record of providing excellent customer service," the statement says.
Buchanan, of the Student Loan Servicing Alliance, points out that FSA was also flat-funded in the recent short-term funding bill and says Congress will need to send FSA more money if it doesn't want service to get worse across the board.
Zampini, of the Institute for College Access and Success, is more direct: "The system cannot hold. The system will not function properly and borrowers will pay the price."
6. With student loans potentially moving agencies, borrowers need to be their own advocates
Trump recently made the surprise announcement that the student loan program would move "immediately" to the U.S. Small Business Administration (SBA) — one day after the White House press secretary assured reporters the loan program would stay at the Education Department.
The SBA has also said it plans to cut its workforce by more than 40%.
When asked for clarity, the SBA press office told NPR:
"The SBA is working closely with the White House, Department of Education, and Congress to finalize a plan for the strategic transfer of responsibilities related to the student loan program."
The "and Congress" there is key because the Education Department's role in administering the student loan program is baked into law, and only Congress can unbake it.
The point here is, the office responsible for managing the $1.6 trillion student loan portfolio on behalf of roughly 43 million borrowers has lost half its staff, been flat-funded and is being told they may need to pull up stakes and, at no additional cost, move the program to the SBA.
Our experts say every borrower needs to be their own expert and advocate. Get reacquainted with your loans. Spend time at FSA's website or elsewhere, researching your options.
Clarity from the department and its servicers may soon be at a premium. But know this:
The age of leniency is over. The default clock is ticking.
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