Federal student loans have taken on a newfound importance as the Trump Administration seeks to re-envision the role of the federal government in providing funding for higher education. Proposed changes and items under consideration include transitioning responsibility for the government's estimated $1 trillion in student debt from the Education Department to the Treasury Department, lessening the number of federal student loan servicers from the existing nine companies to one, eliminating the Public Service Loan Forgiveness and Stafford loan programs, modifying the income-based loan repayment plan and allowing Pell Grants to be utilized year-round, long a request of many left-leaning education advocates.

The elimination of the Public Service Loan Forgiveness and Stafford loan programs, modification of the income-based loan repayment plan and expanded Pell Grants were included in the President's proposed budget and are likely part of an opening salvo in what are expected to be significant negotiations about the future of the federal student loan system. Elimination of the Public Service Loan Forgiveness program, which allows borrowers to have the balance of their loans forgiven after spending ten years working for the government or a non-profit and the Stafford loan program, which provides federally subsidized loans for low-income students at lower interest rates, would require congressional approval. Modifications to the income-based repayment program however could be implemented through executive order. Under the President's Budget proposal, graduate students would have to pay 12.5 percent of their salaries for 30 years — an increase from the current Obama Administration plan, under which they pay ten percent of their income for 25 years. Like graduate students, undergraduates will have to pay a higher percentage of their income every month than under the Obama Administration's plan — 12.5 percent instead of ten percent. But their loans would be forgiven after just 15 years of payments, instead of 20.

In addition to the changes included in the President's Budget proposal, the Trump Administration is reportedly considering moving responsibility for overseeing more than $1 trillion in student debt from the Education Department to the Treasury Department. The federal student aid office has been subject to criticism over the effectiveness and expense of its debt collection programs. Several government audits took issue with the Department of Education's handling of its student aid programs. Moving the federal student aid unit probably would require congressional action where it could receive bipartisan support, but critics worry that the move could hurt students, asserting the Treasury Department is not properly equipped to work with students. In mid-2015, the Treasury Department conducted a pilot project in which its employees tried to collect on defaulted loans, a job the Education Department contracts out to private companies, hoping to increase collection rates and help borrowers better understand their repayment options. It failed on both accounts as a control group of private collectors recovered more money and got more borrowers out of default.

Takeaway: With the appointment of Betsy DeVos as Secretary of Education, observers had expected the Department to focus on promoting school choice initiatives. School choice, however, seems to be taking a back seat to a variety of proposals to fundamentally reimagine the federal government's role in federal student aid.