Navigating Student Financial Aid in Changing Times: What Students and Parents Should Know

Update: On 3/20/25, President Donald Trump signed an executive order calling for the dismantling of the U.S. Department of Education (ED). He said during a White House event on 3/21/25 that student loans will be handled by the Small Business Administration. Read the latest news coverage here.

What’s Happening with the Department of Education

Every year, more than $120 billion in federal student aid moves through the U.S. Department of Education (ED) to help nearly 10 million students and their families pay for college. And while the system has had its share of administrative headaches in the past few years, it has built reliable pathways connecting students to grants, loans, and work-study jobs at thousands of schools across the nation.

As you may have heard, the Trump administration is reportedly preparing an executive order that would attempt to downsize or potentially eliminate the ED, a department that manages roughly $1.7 trillion in federal student loans. This proposal is more than a policy adjustment—it would be a massive shift that could impact everything from how students apply for financial aid to the protections borrowers have.

As of publication on March 13, 2025, the Trump administration initiated mass layoffs at the ED, reducing its workforce by nearly 50%. The headlines keep coming, and sifting through noise can be overwhelming when trying to grasp how it might impact your financial future. But, if you’re one of the millions of students or borrowers counting on federal aid to fund your education, the truth is that these changes could directly affect your education plans and how you pay for your degree, so it’s important to stay informed.

What This Could Mean For Your Education Funding

If the Trump administration succeeds in dismantling the ED, what does this mean for you as a student or borrower?

You’ve probably gotten used to filling out the Free Application for Federal Student Aid (FAFSA) a certain way, knowing who to call with questions, and understanding when your aid will arrive. With the proposed changes, financial aid could be moved to a different agency or even to state governments. And as we saw in 2024 following the troubled rollout of the FAFSA Simplification Act, changes to established processes can send ripples through the student loan ecosystem, delaying access to critical financial aid.

Shift Toward Private Lenders

One proposal getting a lot of attention would shift student lending from the federal government to private lenders, essentially privatizing the student loan market. If private lenders take a bigger role in financial aid, one result could be a surge of loan options for students and their families, including more flexibility in loan options and terms or specialized loans for certain majors.

But there’s a trade-off. Private lenders typically have stricter credit requirements than federal programs, which means credit score and income could matter more. Given many undergraduates are just beginning to shape their career paths and may have little to no credit history or income, they may need to apply with a cosigner in order to qualify.

Increase in Interest Rates & Variability

If federal lending moves entirely to the private sector, borrowers might also be concerned that interest rates will increase and be more varied across different lenders and loan types. While federal loans offer the same fixed rate to everyone, private lenders adjust their rates based on a borrower’s credit profile. And, interest rates are already climbing across the board. In fact, 10-year Treasury yields (which influence all types of lending rates) have hit their highest point since 2007, which means even existing variable-rate private loans could get more expensive as the market shifts. Just like buying a house, timing matters, and the market is heating up.

It will be more important than ever to choose the right private lender based not only on interest rates, but the terms and benefits they provide, such as automatic payment discounts, cash back at graduation, or access to skills training and career coaching (which we provide all borrowers through AscentUP).

Fewer Paths to Loan Forgiveness

For those of you already juggling federal loan repayment, you know the drill—just when you figure out the system, it changes again. The SAVE plan provides for lower monthly payments, faster paths to forgiveness, and protection from ballooning interest, but is temporarily unavailable and on shaky ground. All borrowers currently enrolled in the SAVE plan have been automatically placed into an interest-free forbearance and the time spent does not provide credit toward Public Service Loan Forgiveness (PSLF). If the SAVE plan is blocked permanently, then borrowers could face higher monthly payments, longer loan terms, and uncertainty about loan forgiveness.

If you’ve been working toward Public Service Loan Forgiveness (PSLF), know that there is a possibility the PSLF program could be scaled back or eliminated. There is a chance that current borrowers could be grandfathered in—but you’ll want to stay on top of announcements.

While Ascent’s private education loans function independently from federal student loan programs, when major policy shifts occur, these changes can disrupt the entire infrastructure and potentially reshape some or all of the options available to students and their families. When a key player changes the rules of the game—all the players are impacted and have choices to make.

What You Can Do

We’ve all dealt with uncertainty before, and while it’s never comfortable, you will get through it. Here are some steps you can take to help prepare for potential changes in policy:

• Get your paperwork in order: Organize your records of the federal aid you’ve received, such as award letters and loan statements, in one place.
• Know your numbers: Make sure you understand your current loan terms, interest rates, and repayment timeline. Knowing where your current loans stand will help you adapt if there is a change in policy.
• Understand how interest rates work: If there are major changes in the market, knowing how interest rates can impact your loan balance could become even more important. Here’s how to calculate your student loan interest:
  • Find your daily interest rate (take your annual rate and divide by 365)
  • Calculate daily interest accrual (multiply your loan balance by that daily rate)
  • Figure monthly payments (multiply daily accrual by days in your billing cycle)
• Stay informed about policy changes: Follow trusted sources for updates and bookmark reliable financial aid websites like https://studentaid.gov/.
• Don’t panic: Remember, most policy shifts roll out gradually. The changes we’re discussing would likely phase in between now and October 2025, with full implementation expected by July 1, 2026. There is time to adapt and adjust your financial plans, if necessary.
• Explore your funding options: Understand the alternative funding options that might be available to you beyond federal student loans, including private student loans, grants, scholarships, and work-study programs.

Ascent is Here to Help

Whatever happens with the Department of Education, Ascent is committed to helping students and their families access and fund higher education responsibly.

The landscape may change, but our priority—your educational and financial success—will not.

We’re in this together.