By: CA Staff Writer | Feb 4, 2025
Millions of student loan borrowers could see their monthly payments triple in 2025 due to proposed policy changes that aim to eliminate income-driven repayment (IDR) plans. Under the Heritage Foundation’s “Project 2025,” key benefits of repayment plans, such as the Biden administration’s Saving on a Valuable Education (SAVE) plan, could be phased out, resulting in a significant financial burden for many borrowers.
Drastic Payment Increases on the Horizon
The current SAVE plan allows borrowers to make payments based on their discretionary income, providing a manageable way to repay loans while preventing balances from growing due to interest accrual. However, Project 2025 proposes replacing these flexible repayment options with a stricter structure, which would lead to much higher monthly payments.
If implemented, the changes would cause annual student loan payments to rise dramatically for different groups of borrowers:
- $2,761 increase for those with some college but no degree
- $2,933 increase for associate degree holders
- $4,064 increase for bachelor’s degree holders
- $2,685 increase for master’s degree holders
For many, this means monthly student loan payments could triple, making repayment unaffordable and increasing the risk of financial hardship.
Elimination of Interest Benefits
Another major change under Project 2025 is the elimination of interest subsidies that prevent unpaid interest from growing when borrowers make their payments on time. This means that even if borrowers keep up with their monthly payments, their loan balances could still increase due to accruing interest.
For example, a Black K-12 teacher with graduate student loan debt who begins repayment in 2024 would likely see their balance grow for at least eight years before making any significant progress toward repayment. This could discourage borrowers from pursuing careers in public service and education, which often require advanced degrees but do not offer high salaries.
The Bigger Picture
The proposed changes have sparked major concerns among student loan advocates and borrowers, who argue that eliminating flexible repayment options will disproportionately impact low- and middle-income borrowers. The potential policy shifts come at a time when millions of Americans are still recovering from pandemic-related financial challenges and struggling with the return of federal student loan payments after the payment pause ended in 2023.
While these proposed changes have not yet been enacted, borrowers are advised to stay informed and consider alternative repayment strategies in case the reforms take effect. The future of student loan repayment is uncertain, but if Project 2025 moves forward, it could drastically alter the landscape of higher education financing in the United States.
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