The 42.7 million borrowers currently have outstanding federal student loan obligations of $1.69 trillion.
By this point next year, millions of borrowers could be expected to pay off their student loans under the original terms agreed upon.
President Joe Biden’s savings for the precious education (SAVE) program remained suspended by two federal court decisions. Save was offering arrangements for continued repayment of income and forgiveness of debts.
Monthly repayment obligations will be delayed until after December. At that point, President Donald Trump’s administration will announce protocols for lending higher education.
But before that, Trump and Congress may scale back the U.S. Department of Education and reassign some of its functions to other departments, including more than $1 trillion in federal student loans.
Mark Kantrowitz, author and editorial board member of the Journal of Student Financial Aid, said it was relatively seamless for students’ higher education loans and financial aid functions to move to the Treasury.
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Still, he believes the Ministry of Finance is ineffective in its collection efforts on repayment of late loans.
Kantrowitz expects that the borrower’s terms on the originally signed-off loan will remain intact unless Congress makes any changes.
Federally supported student loans have lower interest rates and fewer restrictions than private bank loans.
Kantrowitz said private lenders have little interest in taking over the federal role in funding higher education, and elected leaders privatize their functions and make university education even more expensive He said he would lose support.
“Private lenders have no desire to do that,” Kantrowitz told the Epoch Times, saying the federal government cannot recover federal taxes on loans previously fulfilled under Biden’s initiative. I added.
The 42.7 million borrowers currently have outstanding federal student loan obligations of $1.69 trillion.
The average public university student borrows $31,960 to cover the bachelor’s degree program.
Education Data Initiative’s website notes state that almost 5% of federal student loan dollars were defaulted in the last quarter of 2024.
Base based on revenue potential
Kantrowitz said federal student loan eligibility guidelines will also not change without the law.
There are proposals to limit borrowing amounts based on degree type (associate, bachelor’s degree, or advanced degree), part-time vs full-time status, and even research programs compared to labor market demand.
For example, graduates of nursing programs can direct starting salaries between $60,000 and $70,000, but the high-wage outlook for the humanities is less certain.
Similarly, the loan amount for students in the Massachusetts Institute of Technology’s Engineering School will outweigh those covering the Community College Art Appreciation Major.
“This is a reasonable first step,” Kantrowitz said.
No new changes have been announced for the forgiveness programme for existing public service loans. This is before SAVE, especially for emergency responders and military personnel.
New ideas for funding universities
Other changes to higher education finance will be considered by lawmakers in the coming months.
The law also brings the current Plus program to sunset. This has not set a limit on loan amounts and is financially weakened by low-income graduate students.
Preston Cooper, a senior fellow at the American Enterprise Institute, said that changing federal student loans and financial aid systems will be the first to address the trends in higher education at a time when the cost of post-secondary education costs will be twice as high as US. said it is necessary. Other Western countries.
University enrollment has declined by 12% since 2010, with about 60% of students earning their bachelor’s degree within six years, and two years of community college technical or vocational degrees being an increase in return on investment. has been proven.
“I think it’s a matter of spending,” Cooper said at a Feb. 5 House Committee on Education and a workforce hearing. “The underlying costs are the issue.”
Trump’s Secretary of Education candidate Linda McMahon advocates for expanding Pell grants to include short-term certificate programs for low-income students.
Under current guidelines, Pell applies to academic programs that last 15 weeks or longer, even if many occupational certificate courses offered at community colleges are within eight weeks.
Kantrowitz said the expansion requires a large amount of funding for the already underfunded Pell program. He estimates Pell will need $2.7 billion to meet existing needs.
“The concern is to take money away from the needs of (traditional) Pell programmes,” he said.
Many community colleges across the country have opted out of federal loan programs, Kantrowitz said, as Pell Grants can cover most tuition costs.
However, some schools deal with fraudulent students who attend classes enough to receive the grant before they drop out and spend cash.
“You can jump out and live from it,” he said. “Pelrunners are a problem.”
