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What the election results mean for student loan borrowers

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Donald Trump and Mike Pence

It’s the political upset of the century, and this election is going to be studied by analysts and political scientists for years. But the reality is clear: Donald Trump has been elected the next President of the United States, and both houses of Congress will remain firmly in Republican control for the next two (and likely four) years. This is starkly different than what was expected by the political class just a week ago – a Hillary Clinton win, with the Senate likely flipping to Democratic control.

A lot is being written right now about this election, and what it might mean for the country. I have seen very little, however, on what the election might mean for student loan borrowers. I’ve been quite clear that this election was going to be hugely consequential for student loan borrowers, regardless of who won. This is certainly still true today. And now we have to start thinking about what may be next for people with student loans.

Below are my candid thoughts on what I think student loan borrowers may be looking at over the next four years. I should be clear – while I believe my assessments below are consistent with the rhetoric and with the past actions of our next executive and legislative leaders, absolutely nothing is concrete at this time. There is a lot we just don’t know – and can’t know – at this early juncture. With that caveat, read on. 

Several proposed reforms may be dead (for now)

Tuition-free college, proposed originally by Bernie Sanders and subsequently adopted by Hillary Clinton, will not happen.

Allowing borrowers to refinance their federal student loans at lower interest rates, while remaining in the federal student loan system, is also unlikely to go forward in my opinion. While Trump has expressed disdain for the federal government “profiting” off of student loan borrowers through high interest rates, Republicans in Congress have resisted lowering interest rates and have blocked all previous bills allowing students to refinance.

Programs to help defrauded students likely to be eliminated

President-elect Trump has promised to completely dismantle many of Obama’s programs that he created by executive action, and he has also criticized the administration for targeting for-profit schools like ITT Technical Institute. Republicans in Congress have largely agreed with him on this. The result is that the Obama administration’s recently-finalized rules to allow defrauded borrowers to request loan forgiveness (called Defense to Repayment) are likely going to be gutted, as are previous rules pertaining to gainful employment requirements for the for-profit college industry.

To be clear, these programs were not created by executive order, so they cannot be undone with a simple stroke of a pen. They were created by executive action through the regulatory process. In short, this required months of public input and rule-drafting. The Trump Administration would likely have to go through a similar rule-drafting process to change or eliminate these regulations. But, they can – and likely will – do that.

Income-driven repayment may be at risk, but may not be

Income-Driven Repayment plans like Income-Based Repayment (IBR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE) are trickier. Income-driven repayment generally has bipartisan support, and Trump himself has expressed strong support for generous income-driven repayment plans. That said, the devil is in the details, and conservative policymakers have been wanting to make changes to these plans for years (such as by extending their repayment terms, or by making them more expensive for married couples, graduate students, and higher-income earners).

In terms of what could happen, it will be easier for Trump to mess with the PAYE and REPAYE plans, because these plans were created by executive action. Again, he cannot just eliminate these plans with the stroke of a pen – the Trump administration would have to through a complex, time-consuming, public rulemaking process to make any changes, just as we would for the Defense to Repayment and gainful employment regulations.

IBR will be harder to eliminate because that program is created by statute (not executive regulations). Getting rid of IBR would require an act of Congress signed by the president.

Ultimately, any of these income-driven programs are potentially at risk, but I don’t necessarily think it’s time to panic. As I said, these programs – at least conceptually – generally enjoy bipartisan support, including support from Trump himself, and default rates would skyrocket if these programs ceased to exist. I think a possible scenario is the creation of a new income-driven plan – either as a supplement or as a replacement for some or all of the current plans. We’ll have to wait and see what that plan might look like before making any conclusions.

The Consumer Financial Protection Bureau is in very real danger

The Consumer Financial Protection Bureau (CFPB) was created during the Obama administration as a watchdog for consumers, including student loan borrowers. It has done some fantastic work for borrowers, especially when it comes to servicing and debt collection. But the CFPB is generally despised by Republicans, and it’s viewed as a shining example of federal overreach and overregulation. Even before the election, the CFPB was targeted through litigation. I think there’s a real chance Congress and the new Trump administration will work to gut or dismantle the CFPB. This would, in my opinion, be a major blow to consumers and student loan borrowers.

PSLF is likely to change – but how, and for who?

Public Service Loan Forgiveness (PSLF) – the program that allows qualifying borrowers to obtain loan forgiveness after 120 qualifying payments on their Direct federal student loans while working full-time in public service employment – has been increasingly criticized by fiscal conservatives as being too expensive (even though no borrowers have obtained forgiveness yet under the program). Reforming the PSLF has been a bipartisan possibility – even the Obama administration proposed placing caps on the program, although it eventually abandoned that proposal.

The first borrowers to apply for loan forgiveness under the PSLF program will be doing so in 2017 – the first year of Trump’s presidency and the new Congress. So the issue will be very much alive then. I think there is a distinct possibility that the PSLF program will be severely curtailed or even eliminated. That said, I think that for current borrowers on track for PSLF, there are reasons to remain cautiously optimistic, as there are legal and policy reasons for borrowers already invested in the program to remain fully eligible (effectively being “grandfathered in”). But at this point, we just don’t know.

Some reform proposals still have bipartisan support

Other good student loan reform ideas do have bipartisan support, such as streamlining and automating income-driven repayment plans, improving student loan servicing, and reforming bankruptcy laws. Forcing colleges to bear more of the financial risks of higher education, providing more financial literacy to prospective college students, and better-targeting federal student aid also enjoys widespread bipartisan agreement. I think that, depending on the details, many of these proposals could come to pass.

Conclusion

I have been saying for awhile now that big changes are coming no matter how this election turned out. Now more than ever, it is time for student loan borrowers to be engaged, to stay on top of what is going on in Washington, and fight like hell for your interests.

Adam S. Minsky Adam S. Minsky is one of the nation’s leading experts in student loan law. He remains one of the only lawyers in the country with a practice devoted entirely to helping student loan borrowers, and he is the author of The Student Loan Handbook for Law Students and Attorneys.