Student loans could become more prominent in paying for college if the United States Department of Education closes. Incoming-President Donald Trump promised to abolish the Education Department if elected, but federal student loan balances are unlikely to disappear. However, even if federal loans remain part of the higher education landscape, changes to the federal student loan program and the options available could lead to borrowers turning to private student loans in greater numbers.

Trump’s Plan for the Education Department

While on the campaign trail, Trump repeatedly called for the 澳洲幸运5官方开奖结果体彩网:end of the Department of Education. If congressional support emerges to shutter the department, trillions of dollars in federal student debt would still need to be managed. Trump has previously advocated for merging the Education Department with the U.S. Department of Labor.

Additionally, Trump would presumably sign the 澳洲幸运5官方开奖结果体彩网:College Cost Reduction Act, an overhaul of several aspects of the federal student loan program. Introduced by House Representative Virginia Foxx (R-NC), this legislation proposes getting rid of 澳洲幸运5官方开奖结果体彩网:PLUS loans and replacing the existing 澳洲幸运5ꦏ官方开奖结果体彩网:income-driven repayment (IDR) plans with a new "repayment assistance plan." Under this new IDR plan, borrowers would qualify for forgiveness after paying an amount equal to the "principal and interest owed under the standard 10-year plan."

Private vs. Federal Student Loans 

Private student loans only accounted for about 7.61% of outstanding student debts, or $133.43 billion, in March 2024. Meanwhile, as of Q4'24, there's approximately $1.64 trillion in outstanding federal student debt.

Federal an๊d private student loans both have advantages and disadvantages, so each type can work well for different students (depending on their needs).

^{Source: Federal Student Aid}

Generally, it's best to start with federal student loans due to their 澳洲幸运5官方开奖结果体彩网:fixed rates, lack of credit requirements, and multiple repayment options (including potential 澳洲幸运5官方开奖结果体彩网:student debt forgiveness). However, private loans can be a good option if you still need to cover a funding gap af🤡ter maxing out your federal stuওdent aid package. However, this dynamic could change if the Education Department disappears.

Even if the Department of Education remains intact, private loans could become a bigger part of the college funding picture should the College Cost Reduction Act become law. The proposed changes to federal student loans, including replacing IDR plans and eliminating PLUS loans, 🌠would limit the options ✃available to borrowers, which may encourage more of them to take out private student loans.

The Bottom Line

Without the Department of Education, Federal loans may become less appealing to borrowers. While not necessarily likely, it's possible federal government will stop originating new student loans altogether, 澳洲幸运5官方开奖结果体彩网:leaving borrowers little choice but to turn to private lenders. Nothing has been decided൲ yet, so borrowers—existing and new—must wait to see how the Trump administration dꦏeals with student debt.