(The Hill) — Student loan borrowers are about to see some of the practical changes the Trump administration is making to the system that will affect their borrowing capabilities and monthly repayments after a year of heated policy discussions. 

How much a student can borrow, what options will be available for repayment and who qualifies for certain plans are all going to change this upcoming summer. 

Experts say the upcoming changes will simplify a complicated system but have the potential to harm millions of borrowers, including through ultimately higher payments. 

Changes to repayment options

One of the biggest changes will be a new income-driven repayment plan that eventually will be the only such option for borrowers. 

Currently, borrowers have their choice of income-driven repayment programs between income-based repayment, income-contingent repayment and pay-as-you-earn, which give varying loan agreements based on multiple factors. 

Starting in July, the Repayment Assistance Plan (RAP), created under the GOP reconciliation bill passed last year, will be the only IDR plan available to future borrowers. 

The new plan adjusts a person’s payments based on their income. Existing borrowers will be allowed to stay on their old plan for now, but any new loans or those looking to consolidate old loans will only be eligible for this plan or a new standard tiered system.  

The new standard plan will base student loan payments on the size of the loan, with repayments ranging from 10 to 25 years.  

“In some ways, it’ll be less complicated for them, because it’s one or the other,” said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. 

While a simpler process has the potential for lower payments for some borrowers, others may see increases in the amounts they actually pay.

Concerns mount over borrowers in default, increased payments 

The number of student loan borrowers in default is predicted to go up, and the Education Department has signaled it will be more aggressive in its collection efforts. 

Almost 7 million borrowers are in default, which means they have not paid on their student loans in more than nine months.  

“We’re looking at, pretty soon, being at a place where there are 10 million Americans with federal student loans in default, and while some of the harshest consequences of default had long been turned off, the new administration has been announcing the benefits turning back on and beginning some of the harsh collection methods that can be more financially destabilizing for struggling families,” said Abby Shafroth, managing director of advocacy at the National Consumer Law Center. 

The Education Department has said it will begin sending out notices that wages will be garnished for at least 1,000 defaulted borrowers starting this month, with more to be added later in the year. The government can take up to 15 percent of a person’s paycheck to facilitate repayment. 

The resumption of wage garnishment comes after a five-year pause that began during the pandemic. The government will also be able to seize the tax refunds of student loan borrowers for the first time in years. 

“This is the first tax full tax season … since 2019 that the Department of Education is going to be seizing money directly out of tax refunds, and potentially for many borrowers, their whole tax refunds to collect on student loans,” Shafroth said.  

“Again … roughly 5 [million] to 10 million borrowers in default could have their tax refunds, including refunds attributable things like the Child Tax Credit, Earned Income Tax Credit, that are important anti-poverty measures for children,” she added.  

Student loan borrowers who receive forgiveness in the new year, unless their case has been held up by a lawsuit, will also have to start paying taxes on the relief this tax season. 

Parent PLUS borrowers, parents who take out loans for their children, will only qualify for the standard plan and will no longer be allowed to be on an income-driven repayment plan for those loans.  

Those on the Biden-era Saving on a Valuable Education plan likely will have to switch soon as the Education Department came to an agreement with the states that challenged the most generous IDR plan ever created to end it. The agreement still needs court approval.  

“We can expect, for example, that the Saving on a Valuable Education (SAVE) plan will fully shut down, but we don’t know when courts will approve the SAVE lawsuit settlement or exactly what steps current SAVE borrowers will need to take,” said Kate Wood, lending expert with NerdWallet. 

Limits on borrowing 

One major change new borrowers will face is limits on how much they can borrow from the federal government for school. 

Undergraduate students will not face changes, but graduate and Parent PLUS borrowers will have new restrictions. 

Many graduate students will be allowed to borrow only $20,500 per year, while those in professional programs, such as future doctors and lawyers, will have a cap of $50,000 per year. Parent PLUS borrowers will be allowed to borrow $65,000 per child.  

The Education Department has said the move is intended to push schools into lowering their prices, but advocates are concerned it will prevent lower-income students from attending pricier schools and leave them out of some career fields that have higher education costs. 

“My fear is that a lot of students are going to hit the maximum amount allowed and either have to get take out private loans, which, they have their own demons, or they, if they can’t get a private loan, they might not be able to complete their education, which is a big concern for me and adds to my fears about default rates, because, of course, the people most likely to default aren’t the ones that owe the most money. They’re the ones that were unable to complete their degree,” Mayotte said. 

The Education Department has said it will also be changing who qualifies for the Public Service Loan Forgiveness program, which allows student loan forgiveness after 10 years for government positions and some nonprofit work. 

The new change, set to go into effect in July, could take out nonprofits involved in “unlawful activities,” which the administration defined as including those supporting gender transition in minors and “abetting illegal immigration.” The directive has been challenged in court.