The Trump administration and Republican lawmakers in Congress are looking to cut or eliminate nearly a dozen student loan and federal aid programs administered by the Department of Education. The cuts, if implemented, could impact millions of Americans, from families who are about to send their children to college, to working people looking to advance their career through an additional degree or certificate, to student loan borrowers who are already in repayment.
The programs at issue are being targeted on two fronts. Last month, the Trump administration instructed federal agencies to review hundreds of programs across the federal government to root out initiatives that “advance Marxist equity, transgenderism and Green New Deal social engineering policies,” according to a memo issued by the Office of Management and Budget. That memo was subsequently rescinded following public blowback and legal challenges, although the White House subsequently clarified that the funding freeze tied to the memo remains in effect. Meanwhile, Republican lawmakers in Congress are eyeing a number of deeper cuts to federal spending to help offset the costs of extending major tax cuts for businesses, estates, and individuals first enacted in 2017 under the first Trump administration, a top GOP priority.
At the same time, the White House is taking steps to diminish or dismantle the U.S. Department of Education, which administers the federal student aid and Direct federal student loan system. The Trump administration is expected to issue an executive order later this month calling on the department to be dismantled. While legal experts are doubtful that the department can be eliminated without action by Congress, the administration is already taking other steps to undermine the department’s functions by sidelining dozens of staff.
Here are federal student loan and student aid programs that could be on the chopping block in the coming weeks and months.
Federal Student Loan and Aid Programs Disbursed By The Department Of Education
Republican lawmakers and the Trump administration are looking at cutting a number of federal student loan and aid programs designed to help borrowers and families pay for higher education. A list of programs targeted by the White House identified by The New York Times, and a House Budget Committee memo obtained by Politico, confirm that these programs are being evaluated for cuts.
Limiting New Federal Direct Student Loans
While the Department of Education confirmed that federal Direct loan disbursements are not impacted by the Trump administration’s funding freeze, Republican lawmakers are looking at capping or reducing new disbursements of federal Direct student loans going forward.
Republicans propose to “Establish new annual and aggregate loan limits for unsubsidized undergraduate and graduate loans” starting in July 2025, reads the House Budget Committee memo.
Sunsetting Federal Direct Graduate PLUS Loans
Republican lawmakers also want to phase out and eventually end the federal Direct Graduate PLUS program. This program allows borrowers pursuing a graduate or professional degree to take out federal student loans covering the full cost of their graduate school education.
“This option would generally eliminate such loans to new borrowers beginning on July 1, 2025, and would eliminate the program altogether by 2028,” says the House Budget Committee memo.
Eliminating the Graduate PLUS program would mean that borrowers who cannot cover the cost of their graduate school education may need to rely on private student loans which are generally riskier, tend to have higher interest rates, and are ineligible for federal student loan forgiveness and relief programs.
Sunsetting Federal Parent PLUS Loans
Republican leaders in Congress also want to sunset the Parent PLUS loan program on the same timeline as the Graduate PLUS program. Parent PLUS loans are issued to the parents of undergraduate students to pay for their child’s college education. The parent, not the student, is the borrower for these types of loans.
Given fairly low borrowing limits for undergraduate federal student loans, the elimination of the Parent PLUS option would mean that families who cannot cover the remaining cost of their child’s education may have to turn to riskier private student loans like graduate school borrowers, or forego higher education.
Modifying Federal Aid Programs That Are Not Student Loans
The proposed funding cuts aren’t just limited to student loans. GOP lawmakers are also proposing cuts to other forms of federal aid that don’t have to be repaid by the student. This includes modifying (although not necessarily eliminating) Pell Grants, a popular form of federal aid provided to low-income Americans.
“This option would allow the Committee on Education and the Workforce to make reforms to the Pell program, such as capping grants at the median cost of attendance and/or expanding Pell grant eligibility to short-term credential programs,” says the budget committee memo. Lawmakers are also looking at unspecified reforms to Work Study programs, according to The New York Times.
Federal Student Loan Forgiveness And Repayment Programs Administered By The Department Of Education
Republican leaders in Congress may also take sweeping action against a number of popular federal student loan forgiveness and repayment programs administered by the Department of Education. If implemented, the changes could impact millions of borrowers.
Repealing The SAVE Plan And Other Income-Driven Repayment Options For Student Loans
The House Budget Committee memo proposes repealing the SAVE plan, one of the hallmarks of the Biden administration’s efforts to lower costs for student loan borrowers. The SAVE plan is an income-driven repayment program that offers reduced payments, an interest subsidy, and multiple pathways to eventual student loan forgiveness. The program has been challenged in court and is currently blocked due to an injunction, leaving millions of borrowers in limbo.
But GOP lawmakers may also repeal other IDR plans, as well. This would include the Income-Based Repayment, or IBR, plan; Income-Contingent Repayment, or ICR; and Pay As You Earn, or PAYE. The proposal would replace these plans with a new IDR plan that uses a similar repayment formula, but eliminates time-based student loan forgiveness after 20 or 25 years – a key feature of all existing IDR plans. Current borrowers would appear to be grandfathered into existing plans, at least according to the proposal.
“Under this option, the Department of Education (ED) would offer borrowers two repayment plans for loans originated after June 30, 2024: the currently available 10-year repayment plan and a new income-driven repayment (IDR) plan,” says the budget committee memo. “This option would eliminate all other plans, including the Saving on a Valuable Education (SAVE) Plan, which is the IDR plan that was created administratively in 2023.”
Unspecified Reforms To Public Service Loan Forgiveness
The budget committee memo also calls for unspecified reforms to eligibility for the Public Service Loan Forgiveness, or PSLF, program. PSLF was enacted by Congress in 2007, and signed into law by President George W. Bush, to provide a pathway to student loan forgiveness for borrowers who commit to working in the nonprofit or public sector for 10 years or longer.
The memo does not outline any specific changes to the PSLF program, nor does it indicate whether current borrowers may be grandfathered into the current version of the program.
Repeal Of New Regulations For Other Student Loan Forgiveness Programs
Republican lawmakers are also looking at repealing Biden-era regulations governing two additional federal student loan programs: the Borrower Defense to Repayment program, which allows borrowers misled or defrauded by their school to request student loan relief; and the Closed School Discharge program, which can wipe out the federal student loan debt for borrowers who were unable to complete their program to the closure of their school. The Biden administration implemented new rules in 2023 that expanded relief and eased the application process for these two programs.
“This option would partially repeal a Biden administration rule that made it easier for a borrower to discharge loans as a result of a school’s misconduct, including, for example, misrepresentation of student outcomes,” reads the budget committee memo.
Federal Student Loan Interest Benefits Administered By The Department Of Education
Republicans in Congress and the White House are also looking at curtailing student loan interest benefits, as well.
Elimination Of Student Loan Interest Deduction
This would include eliminating the student loan interest deduction, which can be as high as $2,500 for borrowers who fall within the program’s income parameters.
“Taxpayers can deduct up to $2,500 of interest paid on student loans from their taxable income,” says the budget committee memo. “This option would eliminate the deduction for student loan interest.” This would, in effect, increase taxes on lower-income student loan borrowers who may be counting on that deduction to increase their tax refund or lower their tax liability.
Elimination Of Student Loan Interest Subsidies While In School
Republicans are also exploring eliminating interest subsidies on student loans while a borrower is in school. “Subsidized” federal student loans do not accrue interest while a borrower is in school, while “unsubsidized” loans do.
“Currently, the government pays the interest that accrues on a student loan while the borrower is still enrolled in school full-time, essentially meaning the student does not have to pay interest on their loan while actively studying,” says the budget committee memo. “This policy option would eliminate this arrangement.”
This would mean that once a borrower graduates and enters repayment, they may owe significantly more on their student loan debt than the amount they originally borrowed, increasing the total amount needed to repay the debt over time.