Will Trump Abolish the Department of Education?

Hello and welcome to another episode of the Student Loan Planner Podcast. Today we're going to talk about will President Trump in his second term abolish the Department of Education. We're going to talk about the fears and concerns we've been getting in our email and just people's questions about that. We're also going to do a listener mailbag at the end of today's episode just to kind of cover some things that we're getting in our inbox, just fears, concerns, anxieties that people have. We're here for you throughout however long it takes for you to handle your student loans fully. That means zero. And so we're going to go through some just some things that you might want to be aware of, some things that you might want to be concerned about, and some things you shouldn't be concerned about. So first we're going to cover this idea of will Trump abolish the Department of Education. We are getting this worry a lot and I thought it would be very very useful to go look at history and talk through what that history means, what it suggests, and why ultimately I don't think that you should be concerned about this particular fear that people have. And so let me go back to the founding of Department of Education around the Carter administration in 1979. So education and the federal government's functions on education used to be wrapped up in the Department of Health and Human Services is what it's called now. It was called like Health Education and something you know something like that and Health Services. And then what they did is they took out education out of that department basically to give a more you know elevated role to government's policy on education. And then obviously in 1980 what happened, President Reagan won in a big decisive election in a very big way kind of you know a little bit of a not obviously the same situation but sort of a similar type of situation where you had an incumbent president that with President Biden that was unpopular, Carter was unpopular, you had this very decisive victory of Reagan in 1980, decisive victory although not nearly as big probably in you know 2024 with Trump's victory over Vice President Harris. And so the reason I'm making that analogy is because in 1981 right away President Trump, President Trump, President Reagan and his administration tried to repeal the Department of Ed. And what happened is there was not agreement on that, they couldn't get it done, and they instead passed a big education bill but one that did not include abolishing the Department of Ed. So as far back as 1981 Republicans have been trying to abolish the Department of Education. Now what we had happen next is you know you had George H.W. Bush become president in 88, he ran for election in 92 and lost to Bill Clinton. And the next time Republicans focused again on repealing the Department of Education was 1996 with Bob Dole as a presidential candidate, they put it in the party's platform to abolish the Department of Education. So if you recall like Newt Gingrich era, Contract with America, it was a very conservative era, very sort of activist sort of era where conservatives were very energized. So that's one of the reasons why you know a more you know very clearly sort of more I don't want to I don't know if I should call it a far-right position or not but a very to the right position of abolishing the Department of Education. That was in the party's platform in 1996 and of course Bob Dole lost the lost election, lost the election to Bill Clinton. Now in 2000 and during the Bush administration, kind of interestingly enough, No Child Left Behind happened. I remember this, my dad was a teacher at the time. He really did not like No Child Left Behind at all, but that bill proposed a big role for the federal government in education. That was actually a bill that was worked together with George Bush and Ted Kennedy of all people, right? So there was no discussion or no serious discussion of abolishing Department of Ed during the Bush, George W. Bush administration. But in 2016 when Trump won that surprise election, there was a big push again towards abolishing the Department of Education. In 2016 what they wanted to do was take Department of Education and abolish it, but take the functions of Department of Ed that had to happen and roll it up into the Department of Labor. Now interestingly enough, Congress actually organizes itself somewhat this way. So if you look at the Senate committee, it's the Senate committee, it's called the Senate HELP Committee. It's the Senate Committee on Health, Education, Labor, and Pensions. HELP. In the House, it's the Committee on Education and the Workforce when Republicans control it, and it's the House Committee on Education and Labor when the Democrats control it, basically trying to telegraph, you know, who their sympathies lie with, obviously, right? Republicans being kind of anti-organized labor and Democrats being pro-organized labor. So just to be clear, right off the bat, we should know that Republicans' plan is not actually to eliminate Department of Ed in everything it does. Its plan is to reorganize and merge Department of Ed with other things and de-emphasize the powers and, you know, authority of Department of Ed. And specifically, what does it want to do? Republicans are really more interested in K-12, usually, on Department of Ed kind of stuff. And in particular, I think this administration is going to be very focused on cultural issues, right? Quote-unquote, the war on woke, right? The war on, you know, transgender, you know, cultural issues, right? I mean, that's what their focus is going to be. It's not going to be on student loans, most likely. Now, I think in the world where they would depolish Department of Education, they would take those student loan functions and put them under a new agency. And what would that agency be? Hard to say. Some Republicans have proposed it should be the Treasury. Some Republicans have proposed making it like the Fed, making an independent agency to administer the student loan programs that would be free from political interference. The truth, though, is we will never know because Republicans will not abolish the Department of Education. And let me explain why. So, because the filibuster was not nuked during the first couple years of the Biden administration, as some were pushing for, that means the Democrats are going to be able to use the filibuster to stop some of the most extreme things that they do not want Republicans to achieve. And one of those things would certainly be to abolish the Department of Education. You would not get 60 votes in the Senate to repeal that or to support abolishing Department of Education. So what that means is you will see a bill that will abolish Department of Education. Actually, fun fact, a Kentucky congressman has been introducing a bill every single year to abolish the Department of Education for a long time. You don't even know about it. You don't even hear about it. Why? Because the And ultimately, this is what I would call headline risk, is, you know, generally speaking, you know, any media, whether it's a traditional media outlet or one of these sort of newer, more partisan outlets, right, they're going to be telling you things that will get them clicks. That's the incentive, right? Just to be clear, right? Any organization, frankly, including And so when you report on the random Kentucky congressman that wants to abolish Department of Ed and introduce that bill every single year, well, you don't report on it because people are like, it's just some one-off person yelling into the wind. It's not worth paying attention to. But when, you know, the bully pulpit of the presidency says they want to do it, then people are worried. And then you're going to see a lot of stories that are going to be like, Should you worry about this? Do you need to be fearful? And the answer is, no, you don't need to be fearful. So keep in mind, even, you know, if the most, like, far-out statements by Republicans became reality, they still have to issue federal student loans. They still have to do that function. And they have only ever proposed abolishing Grad Plus and limiting Parent Plus loans. Republicans have never proposed completely eliminating, in a serious way, everything the government does on student loans, right? They've only, they only want it to be, you know, Stafford loans only or something like that. And that means that you're not going to see the government completely get out of the student loan program like many people would like. And the reason that wouldn't happen is because, you know, the government's role in student loans keeps interest rates down for borrowers. It takes a lot of business out of, you know, the private student loan market. And it just, you know, it just sort of prevents folks from having, you know, just those sorts of worries and issues because they're able to get better interest rates. So no, you don't have to be worried about what happens with, you know, the apartment abed. I just want to make that clear. One thing, though, to be aware of is if Republicans do not believe a agency organization should exist, then it's natural to, you know, not be shocked that they're going to appoint people that probably also have that same point of view, right? So you probably will see the Secretary of Education under the Trump administration make policy in such a way that reflects the belief that the Department of Ed shouldn't exist and should have a more limited role. And so that possibly means slower processing times for things that the administration doesn't agree with. It might mean less generous executive actions. It will mean that. It might mean a more difficult time getting through the bureaucracy to get certain things accomplished, like making sure your payment count is updated correctly. It might mean the impossibility of getting a discharge of your student loans if you went to certain types of for-profit programs. So those are the sorts of things that the belief of abolishing the Department of Ed might actually, you know, impact. Because, you know, any executive actions or those sorts of things could absolutely be impacted by, you know, the Republican view the Department of Ed shouldn't exist. So just wanted to kind of clarify some things there. Remember, 60 votes in the Senate, that's still a very important thing. There's a lot of stuff you can accomplish without 60 votes in the Senate, but it's typically stuff that affects spending levels or taxes. So those are the big things that you can accomplish. And also, I guess, appointments, right? You can make different kinds of appointments to different sorts of offices, right? So the courts, appointments to, like, cabinet agencies, you can probably fire a lot of people that are political appointees. You can do that. You can also make changes to spending. For example, if, you know, Republicans wanted to dramatically cut spending on the Department of Education, they could probably do that. And that would have downstream impacts on a lot of things that the Department of Education does. But to completely eliminate it, to completely block PSLF and things like that, you cannot do that unless you've got 60 votes in the Senate. So that's a bit of good news, is you really do need to be very careful in paying attention to what is achievable with the current state of things, you know, and what is not achievable with the current state of things. So now let's listen to a few listener questions. I think these will be pretty interesting to listen to. So let's take a listen, and we'll see what the answer's going to be. Hi, Travis. I have a question about recertifying income for an IDR plan during a gap in employment when there's no income being brought in. As an example, assume someone graduates from residency in June and plans to take a break before starting as an attending physician in October. If their IDR anniversary is in August, how should they recertify their income? The most strategic but potentially morally gray answer would be to truthfully report $0 of current income in August, which would allow $0 a month as payments for the next 12 months, at which point a 2025 tax return would show a partial residency, partial attending salary. This is consistent with the well-established practice of recertifying any time the income goes down. Are there legal-slash-ethical implications to this that I'm missing, or is this a potential loophole in how the yearly income recertification process is structured? The correct answer would seem to be more clear if the timeline were much shorter, such as a few weeks of a break between employment, or if it was much longer, such as several months in between employment. I'm wondering how you're seeing this issue. Thanks. So with IDR recertification, you can absolutely recertify any time your income goes down. The way I would do this, in terms of a gray area, is if you have not started employment yet and you have finished, let's say, your med school, for example, you consolidate, you're able to say that you have no current taxable income, because that's a true statement, so that's why most everybody gets a $0 a month payment coming out of their school, because that's a true statement. Now, if you're in between residency and being attending, for example, where you have this huge income increase, and let's say your due date for recertifying your income is in August, and your income is dramatically higher, what you want to do is just use tax returns, because it's easier and it doesn't raise any questions. So what I mean by that is, okay, if your recertification date is in August, well, if you use your prior year tax return, it's actually reflecting a resident income already, and you don't have to do anything, you know, at all untoward or not truthful to just use your tax return and have that income be lower. And also, let's say that you had, you know, a higher income for a while, but, you know, maybe the year before this past year, you had a lot lower income than you had the prior year, and so then there's a opportunity potentially to legally file a tax extension on your tax return, because that would make your taxes due in October instead of August, and then you would most likely be able to use your tax return that's the most recent available, which in this case, you know, would be, if we look and think about, you know, recording this in late 2024. So prior year tax returns 2023, if you had a recertification date in August of 2024, but you filed your 2023 extension, then you'd potentially be able to use your 2022 tax return instead of your 2023 return and get a much lower income-based payment for a longer period of time. So this is something that, will it always work? I cannot promise that, no. But does it work right now? Does it work in our experience? Yes. And so one of the things that people are not aware of is the servicers are allowed to ask for clarification. The servicers are allowed to say, well, I'd like to get a little bit of extra information on your income. They are allowed to ask that. And, you know, if they do ask that, you just have to see very carefully what they're asking for, right? Are they asking for a current pay stub? What exactly are they asking? You know, you don't necessarily have to comply with that. It just sort of depends on what they ask, right? So ultimately you have to comply with it if they kick you off your IBR plan onto a standard plan or something like that. I've, frankly, I've never seen that yet. So who knows what will happen with the next four years, right? Because the servicers could be instructed to be more aggressive on recertifying income, and that could be something that happens. So let's take another question. Hi, Travis. Thanks so much for your podcast. Really appreciate it, given all this confusion right now. So I have a question for those of us who applied for consolidation and for SAVE, but never actually entered into it due to the court injunction. So specifically in my situation, in April 24, as part of that temporary IBR waiver, I consolidated my undergraduate and graduate loans to get the higher PSLF eligible count applied to the consolidated loan. After that, I was put on a standard repayment plan and was waiting for the recalculation under the SAVE plan. But then on July 18, the court injunction hit, putting all that processing on hold. And since then, I have been accruing interest on my loans. Now this is different from the SAVE administrative forbearance because I've technically not been enrolled in SAVE at this time. So for those of us in this situation, does this time period count as SLF eligible for loan forgiveness? Thanks so much for your time. Appreciate it. So unfortunately, I do not think that any of this period will count for PSLF regardless. For people in the SAVE forbearance or people who consolidated and were waiting to get approved for SAVE, I think that there is a chance that you could get PSLF buyback if you're going to get total to 120 payments sometime in early 2025 because I don't think they will have had time to repeal that PSLF buyback rule yet. But beyond that, I'm quite uncertain about this. So that's why I would say for most people, they need to get onto the IBR plan because that's definitely a plan that people have access to if you need to get PSLF. So let's take another question. So I had a question and wanted to see if you were able to help with this. Thank you so much, by the way, for all of the useful information and the videos. Apparently, I missed a big video three months ago. But like I saw in the video, nobody was really talking about the pay plan ending. So it's gone away. And it went away to simplify things to get everyone on the SAVE plan, which I'm on the SAVE plan. So I'm in that forbearance and kind of limbo place right now. I am also seeking PLSF. And I wanted to know, do you think the pay plan may come back now that the SAVE plan looks like it's not gonna be approved? And can we do anything about it? Like the lack of information sent out by StudentAid.gov, nobody notified us. I see you guys did several videos on it. I must have missed those. But I'm kind of irritated now that the only plan that I can apply for is the IBR and my payments are going to be really, really expensive with just that plan. Just wondering your thoughts. Do you think if SAVE is completely thrown out, will the pay plan come back? Or should I just suck it up, apply for IBR so I can at least continue to get some credit for the months for my PLSF? Let me know your thoughts. Thanks. So there's a chance that the Biden administration in its last few weeks will reopen the pay and the ICR repayment plans to borrowers again, because they know they're going to lose in the SAVE plan. They know that that's toast. And the idea is, yeah, they do want to try to create as many affordable repayment options as possible. They were trying to accomplish simplification of the student loan program through executive action, and that's clearly not going to work. So I think their priority is to give people the lowest possible repayment number. And they were the ones that blocked the pay and the ICR plans and phased them out for new borrowers. And they have the power to unphase them out. And I think they also want to try to signal that the pre-COVID status quo is okay. And that would honestly be a big win for borrowers if we just went back to the pre-COVID rules for student loans, because you would have options like pay and ICR and others. So I think that hopefully we'll see them reopen the pay plan, but we can't count on it. We just have to wait and see. So let's take another question. Hi, I'm at 113 qualifying payments toward the 120 that I need for student loan forgiveness. I'm on an ICR plan, not with the SAVE program. And I'm with Mojila, which is the servicer for my loans. And my question is, from May to November of this year will be the seven months that I need to reach the 120 qualifying payments. However, in June and July of this year, Mojila put all loans in administrative forbearance because of the transition that they were doing to the new platform. So will I still get credit for those two months? And would that count toward the seven months that I need toward the 120 that I need for student loan forgiveness? So I need just clarification on that, because it's so confusing with what's going on with the block with the SAVE program. So I don't know whether I'm safe with that, because I really want to go ahead and get this done as soon as possible so that I can get out from under this before, you know, anything else crazy happens. If you could answer that question for me, I would appreciate it. Like I said, I'm on the ICR program. And I was wondering whether those two months of administrative forbearance that Mojila put us in because of the transition, would that still count toward the qualifying payment, being that I'm in an ICR and not the SAVE program? Thank you. So this is a tough one, because the answer is yes, you're supposed to be able to get credit for it. But with the, you know, backlog at Department of Education, how ineffective this Department of Ed has been in actually doing its job, I do not necessarily have confidence, unfortunately, for this listener that they will process everything correctly before the new administration comes in. So administrative forbearance that's not, you know, that's done to you versus something that you asked for is supposed to be something that counts for PSLF, and certainly a transition to the Mojila platform theoretically should count. So I would go ahead and have the belief that it counts, and I would apply as if it counts, and then I would either, you know, advocate for getting it forgiven because it should count, or I would offer to do a PSLF buyback kind of scenario if needed to, to get it over with as fast as possible, because this person, if they have seven months left, you know, they would be on track to getting full forgiveness sometime in maybe April or so, and that might be soon enough where PSLF buyback might still work. So that would be my suggestion is, you know, take your chances. There's nothing to lose by advocating for yourself and saying that you believe it should count, because, you know, under technically the rules that the Biden administration put forward, theoretically it should. So let's do another question. Hey Travis, my question is about the 10-year standard repayment plan. I'm a dental specialist and owe around $75,000 in federal loans at 4.75% interest. I enrolled in the SAVE program using my residency income and currently have a very low monthly payment. My recertification date is in February, and now that my income has jumped, if I recertified with SAVE, my monthly payments would be around $1,000 a month. I feel like I have better uses for my money than rapidly paying down my 4.75% student loans. So does it make sense for me to get on the 10-year standard repayment plan? If so, what is the best way to go about doing this? I've had a terrible experience with Mojila and don't really trust them to switch me over, so I had considered just not filing my recertification and letting the system kick me back to the standard plan. Is that a terrible idea? Any advice or insights you can offer are much appreciated. Thank you. So for this one, this is a really interesting question because you would want to know how the student loan program works with picking payment amounts. You can pick a really low payment amount. A lot of people are not aware of this. So if you consolidated a balance over $60,000, the standard repayment plan changes from the standard 10-year to a standard 30-year. So if this person really believed that 4.75% is very low for them, that they would like to use their money for other things, what she could do is just consolidate and get them to the standard plan, and then you have a 30-year plan, and so for a 75k balance, that 30-year payment would probably be like $400 or $450 a month instead of $1,000 a month. So that would be a way to get a low payment. I would only do that until the, you know, I would wait until that 0% interest period has expired, however long that lasts, probably at least until January 20th when the new administration comes into power, and the only thing that I would push back on about the 4.75% is 4.75% for student loans would be after-tax, meaning it's not tax-deductible. So a lot of times you want to make sure that you look at your entire financial portfolio and think about, well, what does 4.75% really mean, right? Because if you look at your mortgage interest, you might be deducting that, and so you might have a 5% mortgage, but after you deduct it, maybe it's only a 3% mortgage in terms of the after-tax costs, in which case a lot of people might be paying extra on their mortgage when really they should be paying extra on their student loans because the 4.75% is not tax-deductible versus the mortgage interest, you know, could be tax-deductible. And the other thing to think about too is, you know, how is your portfolio invested? So, for example, do you have a lot of money in brokerage accounts? If so, then you have, you know, a pre-tax yield on a bond right now is something like 4 point whatever percent, 4.3, let's say, and that's pre-tax, so after-tax you're really taking home maybe 2.5 or something, so a 4.75 on your student loan might actually be pretty expensive. So, what I'll say is, you know, in general, whenever you have a really high price-earnings ratio in the stock market, or at least an elevated one, it's not a bad idea to deleverage if you have some extra cash lying around. Now, that comes after having a rock-solid emergency fund, putting a good amount in retirement, having a brokerage account set up and being funded at some level, but just keep in mind when we're thinking about interest rates, you know, a lot of times you've got to be thinking about after-tax equivalent interest rates and what the comparison is for your finances. So, let's do one last question. Hey Travis, thanks so much for taking my call. I was wondering what you thought was going to happen with parent plus loan borrowers in the near future who are going to be done borrowing by July 2025, meaning they're going to be locked out of the double consolidation loophole. A lot of borrowers in that instance, they may be okay with just being on ICR and they may have sent their kids through college thinking that they could pay back the parent plus loans using income contingent repayment. However, now because of the Eighth Circuit Court of Appeals judge leaning towards him saying that ICR forgiveness may not even be legal, how do you think that's going to impact parent plus loan borrowers who never heard of the double consolidation loophole or who may not be done borrowing by the time the loophole closes and otherwise only borrowed because they thought they could get income contingent repayment forgiveness? Thanks so much, I appreciate it. So, for this one, every bad thing that could happen to student loans can't be true at once. So, what I mean by that is if courts rule that ICR forgiveness is not even allowed at all, then frankly, they'll probably strike down the idea of weighted average consolidation too. And so, if I was going to really game the system in that situation, I would take out all the ICR eligible parent plus loans I could, I would pay for 25 years until I'm 75 or 80, and then I would go take a, you know, European history of art class or something like that and get $5,000 loan, I'd reconsolidate everything back together, and then I would pay for another 25 years, and my plan would be to die with the debt. So, that would be if a bunch of terrible things happened which wouldn't happen long term because everybody in DC knows the parent plus loan system is really broken, but the political imperatives and pressure from universities keep that uncapped borrowing in place because it's just more painful for Congress to cap it than to, you know, it's more painful for Congress, you know, to leave it, to cap it than to keep it uncapped, basically is what I'm trying to say. So, I think that the ICR forgiveness route for parent plus borrowers is actually a tremendous route that is very underutilized and people are very unaware of. Most people in America have either themselves or their spouse earning most of their retirement income in the form of Social Security. That's the majority of what they're earning for a lot of people, right? And then the other spouse might be earning a little bit more, they might have some pension income, they might have a higher Social Security payout, they might have some IRA distributions in retirement, but if you really plan carefully, you could very much be in a situation where, you know, even if your only option is the ICR plan, you could still have a fantastic retirement if you're, you know, a moderately frugal person. And for the double consolidation, you know, loophole ending in mid-July of 2025, we have to wait and see on that because that rule is embedded into the save plan rule and if that save plan rule falls, the ending of the double consolidation might go away too. So, this is just another example of why we have to wait and see on a lot of these policy things to just be able to tell what's going to happen. So, those are all the questions for today. It's interesting that we haven't yet got questions about what's going to happen to student loans, you know, in Trump's second term. You know, obviously, we'd like to just keep it focused on the impact on student loans because that's just the only thing I'm really qualified to talk about, I guess. But, you know, so if you want to ask a question about your student loans, about any concerns that you have, if you are wondering if it changes your strategy, if you're wondering what will happen with the IDR waiver count payment that they're supposed to update, you know, whatever your questions are, you can ask them at studentloanplanner.com slash voicemail. Just go there, press the record button on your phone, read off a quick minute question and we'll feature it on a future pod episode if you do that. And if you need a student loan consult, we are having a lot of people book, you know, what now consults is what I'll call them and you can do that at studentloanplanner.com slash book and we are actually modeling a new proposal for income driven repayment. I'm calling it the House GOP proposal that, you know, interestingly enough, in terms of the present value, the cost in today's dollars, has a similar potential benefit as the safe plan of all things. Basically, the House GOP's proposal is to do sort of payment matching. So if you're making payments based on your income, they would match those payments until you got to a certain level of payment relative to your loan amount. And it's quite interesting, it would result in a full payoff of the loans for people and you wouldn't have to worry about the tax bomb anymore because you're actively paying down the loan. But I think they also drastically underestimated how expensive this was going to be when they were writing the bill, so I don't think they'll actually put it forward. But it's still really interesting to see the 2017 House GOP proposal was very, very strict and traditional small government, let's cut everything. And the 2024 House GOP proposal is sort of like, let's spend a bunch of money, let's do a bunch of like, let's make a new government 401k matching style program for people's student loans. And it's a very different like, way of thinking about student loans coming from the Republicans than I've ever seen before. And it's a lot more, frankly, you know, whether you want to call it liberal or progressive way of thinking on student loans, it's definitely a big spending kind of way of thinking about student loans compared to things that they've done in the past. So we'll be following all of the breaking news about, you know, who does Trump put into place, the Department of Ed, we're going to be looking at, you know, these proposals coming out of the Republican caucus on student loans. There's rumors that there's, you know, bill language being circulated about what they could accomplish through the 50 Senate vote threshold through budget reconciliation on student loans. So we'll give you updates on that, so that you'll be in the know and so that you can keep your anxiety levels low, and so that you can feel confident in your plan for your student loans, knowing that it's not going to impact your finances in a negative way. So that's our goal. That's why we do this podcast. That's why we hit that record button each week. Thank you so much for listening. If you have any questions, reach out to us. If you need a consult, you know where to go. If you want to record a quick question, studentloanplanner.com slash voicemail. Have a wonderful rest of your week.