00:00 Speaker A
According to research by the college investor, Americans have roughly $1.8 trillion in student loan debt. And the majority of that number is federal student loans serviced by the Department of Education. President Trump signed an executive order aiming to eliminate the department. And even if the plan doesn’t go through, the Trump administration has laid off roughly half of the department staff. That leaves tens of millions of borrowers wondering if this will impact their debt. Joining me now to break it all down, we’ve got Betsy Mayotte, who is the Institute of Student Loan Advisors president and founder. Betsy, thank you for taking the time. It’s good to see you again. So, just first and foremost, would borrowers be impacted by the elimination of the Department of Education?
01:34 Betsy Mayotte
So, the vast majority of the everyday work done on federal student loans is actually done by loan servicers and vendors. So, and as you mentioned or your prior guest mentioned, the terms and conditions of the loans are set in statute and federal regulations. So, most things would not impact borrowers, but of course, anytime you move a really big portfolio from one place to another, there could be delays.
02:30 Speaker A
And so, what about on the front end of that when you are applying for the loan? How does that process get changed?
02:56 Betsy Mayotte
You know, that’s a good question. So again, a lot of that is done by servicers, but the day after the Department of Ed did their big reduction in force last week, the FAFSA failed. Um, and I actually just recently read that because of that, they’re actually bringing back some of the people that they laid off last week to make sure that doesn’t happen. So, that’s something we’re definitely going to be watching.
03:44 Speaker A
Should federal borrowers be making any changes at this point?
04:01 Betsy Mayotte
That’s a great question. And my, my short answer is no. People definitely should not be making panic decisions uh, based on a new headline or an executive order that gets signed. Um, as your prior guest mentioned, these things can take a long time to shake out. We expect there to be lawsuits. So, sort of like take a deep breath and keep yourself educated on what’s going on.
04:58 Speaker A
And so, as we’re trying to help folks stay educated on this, President Trump also making changes to forgiveness plans. What should borrowers be preparing themselves for there?
05:25 Betsy Mayotte
They actually haven’t made any changes to their forgiveness plans. Um, due to the save litigation that was initiated under the last administration, some of the income driven repayment plans are temporarily on hold, meaning you can’t apply for them, but those will be coming back in the next month or two. There was an executive order signed around public service loan forgiveness, but it’s questionable whether that is an executive order that’s allowed under statute. And regardless, it just instructs the secretary to uh, pursue potential new regulations around that program.
06:26 Speaker A
So, more so just the initiation of legal proceedings to try and figure out whether or not the executive order is actually something that can be enforceable at this juncture.
07:02 Betsy Mayotte
That’s right.
07:07 Speaker A
And so, what should incoming students be aware of when they’re signing up for loans right now? Do you think we’ll see more universities following Harvard and eliminating tuition for some students under certain household income thresholds?
07:43 Betsy Mayotte
Well, I hope so, but you know, that’s another really good question. One thing I am watching very closely is the budget reconciliation process because I do think that has the potential, a big potential to impact future students, such as restricting the amount that people can borrow or putting some risk sharing in place for colleges and universities around the student debt issue.
08:37 Speaker A
Betsy, thank you so much for taking the time here with us today.
08:47 Betsy Mayotte
My pleasure.