On May 22, a federal judge temporarily thwarted President Donald Trump’s plan to dismantle the Department of Education by ordering the ED to revive recently ended staff members. The ruling is in line with new research revealing the negative impact of a decline in the ED workforce on student loan borrowers.
As the future of the department depends on balance, as we know today, the federal student aid programs do too. On the day of the sentencing, the House passed a settlement bill that could significantly change federal student loans for current and future borrowers. The bill is currently located with the Senate for consideration.
Judge overturns massive layoffs at the Department of Education
Last week, US District Judge Myong Joun issued a temporary injunction against Trump’s “reducing power” (RIF), which affects more than half of ED staff, ordering employees fired by ED to revive them. In March, more than 1,300 Ministry of Education staff were fired, and soon the president signed an executive order to close the ED.
Joun’s ruling comes after several school districts, education groups and the state attorney general filed lawsuits alleging that layoffs undermine their ability to perform duties, including overseeing student aid programs.
“Before (reducing power), the department was already struggling to achieve its goals,” Joun wrote in his opinion.
New research reveals student aid confusion amid layoffs
The concerns of financial institutions and the Attorney General are guaranteed. According to a new RIF Impact Survey by the National Association of Student Financial Aid Administrators (NASFAA), borrowers are already seeing the negative impact of ED workforce reductions. In May 2025, the association surveyed higher education institutions across the country to see how ED layoffs were affecting operations.
In this study,
This study is not just evidence that departments struggle to catch up. On May 15, ED released its first status report on the status of income-driven repayment planning applications. The report showed that only 4% of IDR applications have been processed, and as of April 30, 2025, roughly 2 million people are still pending.
What do these two news items mean to borrowers?
The Department of Education handles federal student aid programs, including processing free student aid applications (FAFSA), payments for federal aid funds, and managing student loan portfolios. Reviving fired employees should mean more staff members to pass applications and help manage their loans. However, there is no guarantee that all employees will return. Many may have found other employment two months after being fired. And the department was already struggling to keep up with duties with a full workforce. This means that borrowers should still expect delays.
If you are planning to apply for a federal aid or income-driven repayment plan, it is time to do so. The FAFSA deadline for the 2025-26 academic year is not until June 2026, but the earlier you apply, the better it is. Aside from expected delays, federal, state and system aid programs are based on a first-come, first-served basis.
If you are already in the IDR and need to re-authenticate your income, you must be notified that the deadline has been extended until 2026.
House of Representatives passes bills that can cut student loan programs
The court’s ruling was a time when the Trump administration set out, but the House of Representatives passed a settlement bill slightly on the same day and achieved a major victory. Part of the bill targets federal student loan programs and proposes changes to loan restrictions, repayment plans, forgiveness programs and sweeps to tax liabilities.
Key provisions for federal student aid include:
The bill was passed by 215-214 votes and is now heading to the Senate for consideration. Experts predict that the bill will meet resistance and undergo changes before it clears the Senate. Once cleared, you either go back home and pass the bill or try again for Senate consideration. It’s hard to know when the bill will be passed and what it will look like, but Republicans have set a deadline of July 4, 2025.
What does this mean for borrowers?
Eliminating the restrictions on plus loans and capping loans could lead to students who obtain federal student loans alone and need private student loans. Private student loans may have higher fees, fewer repayment options and minimal credit requirements. This feature can make repayments more difficult, especially for students who rely on federal aid for expensive degree programs such as MBA programs, law schools, and medical schools.
It is important to remember that the bill is not yet a law and that its provisions, including those listed above, may change. With this and several other student loan invoices passing the law, borrowers need to continue making monthly payments as usual and keep track of student loan news. Borrowers may want to start planning now due to higher payments and the possibility that they may need to switch between repayment plans.