NASFAA, Higher Education Experts Outline Future of Student Loan Repayment Policy
By Maria Carrasco, NASFAA Staff Reporter
A panel of higher education experts, including NASFAA, gathered on Friday to discuss current issues and challenges facing the federal student loan programs.
The panel, hosted by the Brookings Center for Economic Security and Opportunity, focused on the ever-changing landscape of federal student loan repayment policy, the flurry of new policy proposals and initiatives coming from Congress and the Department of Education (ED), as well as evolving legal challenges.
Jill Desjean, NASFAA’s director of policy analysis, joined other higher education experts, including Lesley J. Turner of the University of Chicago, Jason Delisle of the Urban Institute, and Sarah Turner of the University of Virginia, to share their expertise on the student loan repayment system.
The panel began by identifying where the student loan portfolio and program stand now, after a five-year repayment pause and a new presidential administration. Notably, this month ED has resumed the collections process for defaulted federal student loans by restarting the Treasury Offset Program, and will begin administrative wage garnishment for federal Direct Loan borrowers in default this summer. Sarah Turner noted that a recent study from the New York Federal Reserve found that student loan delinquency has returned to the pre-pandemic rate, with more than 10% of balances and roughly 6 million borrowers either past due or in default.
“The big thing that could hit markets in a very significant way is as those delinquencies are reported for the first time, in what is now about five years, many borrowers in states will see a significant drop in their credit scores, and that has real implications for capacity to buy cars, and to access other forms of consumer credit,” Sarah Turner said.
The panel also discussed the Saving on a Valuable Education (SAVE) program, which remains in limbo after multiple legal challenges and court rulings. The Eastern Missouri lower district court is expected to issue a final ruling on the fate of the SAVE plan, though when the decision will be made is unknown.
Currently, borrowers enrolled in or who have applied for the SAVE plan remain in forbearance, unless they select another income-driven repayment (IDR) plan. Desjean and the other panelists noted how this process has been extremely confusing for borrowers.
“Whether you agree or disagree with the SAVE plan as policy, I think everyone can agree that this protracted litigation is really harming borrowers because they're caught in the middle,” Desjean said. “It's hard for us at NASFAA to keep track of the [SAVE program] and that's all we do. So imagine if you're a student, you have an actual life, and you just want to make a student loan payment. Figuring out your options are hard right now.”
The conversation also touched on the reconciliation bill released by the House Education & Workforce Committee that would make several changes to student loan programs. Desjean noted aspects of the legislation that could be helpful for borrowers, such as the interest subsidy, which could alleviate the psychological barriers borrowers face with rising interest on their loans, and creating a single, simplified IDR plan.
However, she also highlighted some significant issues in the legislation that could create more barriers to borrowers, such as a 30-year path to loan forgiveness, and that the bill would end the possibility of $0 payments, even for borrowers with very low incomes.
Lastly, the panel touched on Public Service Loan Forgiveness (PSLF). Desjean highlighted that because the SAVE plan is in limbo, many borrowers are in a temporary forbearance and cannot make progress toward PSLF. Additionally, the PSLF buyback process could be challenging for ED, with nearly half of its staff laid off. This is on top of ED’s recent negotiated rulemaking announcement, which seeks to refine the definition of a qualifying employer for PSLF eligibility.
A key point Desjean and the panelists kept coming back to throughout the panel was how the changing landscape of the student loan programs has created significant confusion and created a number of challenges for both students and institutions.
“It is so hard to get real information,” Desjean said. “Our members are telling us that students are calling them with questions like ‘Now that there's no more Department of Education, will I get a Pell Grant disbursement next month?’ or ‘Now that there's no more Department of Education, do I have to pay my student loans back?’”
Publication Date: 5/19/2025
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