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Friday, July 18, 2025

Interest charges will restart for borrowers in SAVE forbearance (Student Borrower Protection Center)

Student Borrower Protection Center’s research partners are conducting a groundbreaking research study that aims to understand how Income-Driven Repayment (IDR) and Public Service Loan Forgiveness (PSLF) programs impact borrowers’ well-being. If you are currently in an IDR plan, working towards PSLF, or your loans have been cancelled through PSLF, please consider participating below (Password: REPAYE).

Participate in Survey

Dahn,

The Biden Administration’s Saving on a Valuable Education (SAVE) repayment plan promised to lower monthly student loan payments for millions of Americans. But legal attacks by the same conservative state attorneys general who exploited the courts to block President Biden’s original student debt relief plan resulted in a court injunction that has blocked borrowers from enrolling. Thus, borrowers have been trapped in a year-long, interest-free forbearance while their unprocessed Income-Driven Repayment (IDR) applications wait in limbo.

But now, Trump and Education Secretary McMahon are saddling these borrowers with interest. Last week, the U.S. Department of Education (ED) announced that it will begin restarting student loan interest charges on August 1, 2025, for the nearly 8 MILLION borrowers stuck in this forbearance.

McMahon voluntarily chose to do this—there was no state or federal court order forcing her hand. Read our Executive Director Mike Pierce’s statement on this below:

“Instead of fixing the broken student loan system, Secretary McMahon is choosing to drown millions of people in unnecessary interest charges and blaming unrelated court cases for her own mismanagement. Every day, we hear from borrowers waiting on hold with their servicer for hours, begging the government to let them out of this forbearance, and help them get back on track—instead, McMahon is choosing to jack up the cost of their student debt without giving them a way out. These are teachers, nurses, and retail workers who trusted the government’s word, only to get sucker-punched by bills that will now cost them hundreds more every month. McMahon is turning a lifeline into a trap and fueling one of the biggest wealth grabs from working families in modern history. It’s a betrayal.”

Read the Full Statement

In response to this announcement, we released a new analysis of this policy change, projecting that the typical SAVE borrower will be forced to pay more than $3,500 per year—or $300 per month—in unnecessary interest charges. In total, we found that affected borrowers will be charged more than $27 BILLION in interest over the next 12 months.

Read Our Analysis

Borrowers have suffered long enough because of the broken student loan system. Despite promises to lower costs for working families, Trump and his allies have only raised them more. Eliminating SAVE and replacing it with the Repayment Assistance Plan (RAP) created by Congressional Republicans means the typical student loan borrower will see their annual student loan costs skyrocket by $2,900—and millions of other borrowers will see their monthly loan bills increase by 50 percent. In fact, they will pay more for longer. RAP forces borrowers to pay for 30 years instead of the 20-25 year timelines of current IDR plans. And now, the Trump Administration wants to pile $27 billion dollars of interest charges over the next 12 months onto struggling borrowers.

But McMahon can’t hide from her decision to drown borrowers in interest charges. We’ve been busy sounding the alarm of her policy choice in widespread coverage:

Washington Post: Trump Ends Interest Subsidy for Biden’s Student Loan Repayment Plan

MarketWatch: Millions of Americans are about to see their student loans accrue interest again. Here’s what to know.

Daily Mail: Millions of Student Loan Borrowers to Be Hit With Crippling Interest Charges as Trump Ends Biden-Era Pause

New York Times: 8 Million Federal Student Loan Borrowers Will Soon See Interest Restart

Newsweek: Student Loan Update: Interest Payments Expected To Jump Thousands

The attacks on borrowers and working families must end. Borrowers deserve justice—not retaliation to the tune of billions of dollars in unnecessary, harmful debt.

In solidarity,

Brandon Herrera

Communications and Digital Strategist

Student Borrower Protection Center

Tuesday, July 15, 2025

Borrower Defense Story 2: Anxiety & Interest (KH)

[Editor's note: This is the second story in a series about student loan debt and the moral necessity of Borrower Defense to Repayment. The first post is here.]

My name is KH and I'm from Florida. My student debt crisis is very personal. I attended Kaplan University Online in 2008 while on bed rest after an accident. My family and I were extremely poor and so the idea of a college education to support my growing family was something that was appealing to me.

My boyfriend at the time was in the agricultural field and only worked 4 or 5 months out of the year. We were so poor that even unmarried with a child he qualified to be on my SNAP and Medicaid applications.

Once I made the call to Kaplan I was told that a degree would take us out of poverty, and we could live happily ever after. I was promised job placement and training for my future job. None of these things happened. I signed documents that indicated I was low income which allowed Kaplan to request more funding from FAFSA.

Then the housing market crash of 2008 happened, and I switched majors to clinical psychology (I was told I would be in the therapeutic field once complete). In 2010 I had a phone call that made me look up the difference between FOR profit and nonprofit schools. Realizing I made a mistake, I switched schools to Lynn University which is a private (expensive) nonprofit. They were the only school that would take all of my credits from Kaplan.

Fast forward to today, I am currently waiting to attend Southeastern Oklahoma State University to complete a Master's degree in School Counseling.

I have received two different notifications from Mohela, my student loan servicer. The first indicates that I'm in-school deferment but it ends two weeks after I start class. Then my payment plans. There are two plans, one is for 700.00+ dollars and the other for 800.00+ dollars. One of my paychecks is 1700.00. There is no way I can survive with 1/2 my pay.

I'm in the Borrower's Defense program because of the mismanagement by Kaplan. I also currently have multiple documents with multiple dates for repayment. There is no correct document that indicates what, when, or how I'm supposed to navigate this. Let me also state, the compounding interest is what makes this incredibly hard. I will be paying over 350,000 dollars from 120,000 in loans.

This is criminal. Period.

Monday, June 30, 2025

Will Maximus and Its Subsidiary AidVantage See Cuts?

Maximus Inc., the parent company of federal student loan servicer Aidvantage, is facing growing financial and existential threats as the Trump administration completes a radical budget proposal that would slash Medicaid by hundreds of billions of dollars and cut the U.S. Department of Education in half. These proposed changes could gut the very federal contracts that have fueled Maximus's revenue and investor confidence over the last two decades. Once seen as a steady player in the outsourcing of public services, Maximus now stands at the edge of a political and technological cliff.

The proposed Trump budget includes a plan to eliminate the Office of Federal Student Aid and transfer the $1.6 trillion federal student loan portfolio to the Small Business Administration. This proposed restructuring would remove Aidvantage and other servicers from their current roles, replacing them with yet-unnamed alternatives. While Maximus has profited enormously from servicing loans through Aidvantage—one of the major federal loan servicers—it is unclear whether the company has any role in this new Trump-led student loan regime. The SBA, which lacks experience managing consumer lending and repayment infrastructure, could subcontract to politically favored firms or simply allow artificial intelligence to replace human collectors altogether.

This possibility is not far-fetched. A 2023 study by Yale Insights explored how AI systems are already outperforming human debt collectors in efficiency, compliance, and scalability. The report examined the growing use of bots to handle borrower communication, account resolution, and payment tracking. These developments could render Maximus’s human-heavy servicing model obsolete. If the federal government shifts toward automated collection, it could bypass Maximus entirely, either through privatized tech-driven firms or through internal platforms that require fewer labor-intensive contracts.

On the health and human services side of the business, Maximus is also exposed. The company has long served as a contractor for Medicaid programs across several states, managing call centers and eligibility support. But with Medicaid facing potentially devastating cuts in the proposed Trump budget, Maximus’s largest and most stable contracts could disappear. The company’s TES-RCM division has already shown signs of unraveling, with anonymous reports suggesting a steep drop-off in clients and the departure of long-time employees. One insider claimed, “Customers are dropping like flies as are longtime employees. Not enough people to do the little work we have.”

Remote Maximus employees are also reporting layoffs and instability, particularly in Iowa, where 34 remote workers were terminated after two decades of contract work on state Medicaid programs. Anxiety is spreading across internal forums and layoff boards, as workers fear they may soon be out of a job in a shrinking and increasingly automated industry. Posts on TheLayoff.com and in investor forums indicate growing unease about the company’s long-term viability, particularly in light of the federal budget priorities now taking shape in Washington.

While Maximus stock (MMS) continues to trade with relative strength and still appears profitable on paper, it is increasingly reliant on government spending that may no longer exist under a Trump administration intent on dismantling large parts of the federal bureaucracy. If student loan servicing is eliminated, transferred, or automated, and Medicaid contracts dry up due to funding cuts, Maximus could lose two of its biggest revenue streams in a matter of months. The company’s contract with the Department of Education, once seen as a long-term asset, may become a political liability in a system being restructured to reward loyalty and reduce regulatory oversight.

The question now is not whether Maximus will be forced to downsize—it already is—but whether it will remain a relevant player in the new federal landscape at all. As artificial intelligence, austerity, and ideological realignment converge, Maximus may be remembered less for its dominance and more for how quickly it became unnecessary.

The Higher Education Inquirer will continue tracking developments affecting federal student loan servicers, government contractors, and the broader collapse of the administrative state.

Wednesday, June 18, 2025

Fintech’s Student Loan Empire in the Age of Trump

As the second Trump administration wages war on the Department of Education, disbands regulatory protections, and openly courts billionaires over borrowers, another machine continues humming in the background—one that rarely makes headlines but stands to profit from the coming deluge of student loan defaults.

Enter Credible, LendKey, Purefy, and Splash Financial—a quartet of fintech firms with shiny websites, soothing interfaces, and predatory precision. Together, they represent a new face of student debt capitalism, where algorithms replace accountability and refinancing replaces relief.

With federal repayment programs in disarray and income-driven repayment options under political attack, these platforms are poised to scoop up disoriented borrowers, offering them lower rates in exchange for their last shred of protection. In this era, fintech isn’t just a workaround to broken federal systems. It’s a weaponized mechanism of privatization, hiding in plain sight.

Credible: Fox News Meets Finance

Credible, a loan comparison site launched in 2012 and bought by Fox Corporation for $265 million, exemplifies the corporate convergence of media, politics, and predatory finance. Its business model is simple: steer borrowers to private lenders and collect a fee.

What makes Credible especially dangerous now is its backing by Rupert Murdoch’s empire, giving it privileged placement across conservative media. In the Trump era, where truth and financial ethics are negotiable, Credible becomes part of the machinery: a platform peddling student loan refinancing under the banner of “freedom” and “individual responsibility.”

Its prequalified offers may seem consumer-friendly, but the reality is more sinister: borrowers lose access to Public Service Loan Forgiveness (PSLF), income-driven repayment, and federal deferment rights—often without full disclosure. And there’s no federal watchdog left with the teeth to stop it.

LendKey: Privatization via Local Lending

Once hailed as a democratizing force in student lending, LendKey now serves as the gateway for credit unions and small banks to enter the refinancing market. By providing digital infrastructure and loan servicing, LendKey enables even the smallest financial institution to compete in the debt arms race.

But it’s no populist hero. In a Trumpian economy where regulatory oversight is gutted, LendKey helps funnel borrowers from federal protections into private debt with fewer rights and more risk. Its loans are marketed with community-friendly language, but behind the scenes they’re just another piece in a growing puzzle of financialization.

As the default rate ticks up—and it will, with millions unprepared for repayment—LendKey's partner institutions may face waves of delinquency. But LendKey still profits, regardless of whether its borrowers sink.

Purefy: Elite Refinancing in an Age of Collapse

Purefy, partnered closely with Pentagon Federal Credit Union (PenFed), continues to focus on white-collar borrowers and high-income households. With its niche offerings—like spousal loan refinancing and Parent PLUS buyouts—Purefy doesn’t hide its demographic targets. It’s a platform for the haves—not the have-nots.

Now, in a Trump-led America where debt relief is dead on arrival, Purefy serves as a lifeboat for select borrowers, mostly those with six-figure incomes and perfect credit. For everyone else, there’s no rescue—just rising interest, frozen wages, and default letters.

What’s worse: Purefy’s slick interface masks its private lending alliances, and borrowers often don’t know whether their servicer is PenFed, ELFI, or someone else entirely. Transparency, once a fintech virtue, has eroded into strategic ambiguity.

Splash Financial: A Fintech Platform for the 1%

Initially built to refinance medical school debt, Splash Financial has expanded into a broader fintech infrastructure role, helping banks and credit unions deploy private loan products under white-label brands. Recently acquired by Nymbus, Splash is less about helping borrowers and more about selling digital weaponry to lenders.

Its target demographic—doctors, dentists, tech professionals—is largely insulated from the coming crash. But as student loan interest rates climb and defaults spike, Splash stands to gain by filtering the "creditworthy" from the desperate, feeding clean data to lenders while offloading risk onto consumers.

In the new political regime, where borrowers are told to “pay what they owe” and compassion is framed as weakness, Splash’s business model looks less like innovation and more like extraction by design.

The Coming Storm: Defaults and Deregulation

Federal student loan payments have resumed, but millions are behind or confused. The SAVE plan is under legal attack. Forbearance options are shrinking. Servicers are overwhelmed or deliberately opaque. The Biden-era reforms are being dismantled, and debt relief promises are evaporating under Trump’s budget cuts and executive orders.

This is a perfect storm for fintech lenders. As traditional repayment plans implode, desperate borrowers will turn to refinancing offers—many not realizing that by switching to private loans, they’re permanently shutting the door on cancellation, forgiveness, or manageable repayment plans.

In this new default economy, the winners are not educators or students—but platforms like Credible, Purefy, LendKey, and Splash. They won’t bear the burden of broken promises or economic ruin. They’ll take their cut, rinse, and repeat.

An Engine of Extraction

This is not innovation. It is not disruption. It is digital debt peonage, dressed in Silicon Valley branding and sold as financial freedom.

In the second Trump administration, student loan fintech is flourishing, not in spite of the chaos—but because of it. These companies are the beneficiaries of policy neglect, privatization, and regulatory retreat. They are the corporate middlemen of misery, accelerating the financial collapse of an entire generation.

If there’s a future reckoning for student debt in America, it won’t begin on a campaign trail or in a press conference. It will begin with the simple question: Who profits when borrowers fail?

Tuesday, March 25, 2025

The Evolving Landscape of Student Lending: Fintech Disruption and Bank Adaptation (Glen McGhee)

The student loan market represents a significant segment of consumer lending in the United States, with approximately $1.7 trillion in outstanding debt. This market is undergoing profound transformation as financial technology companies challenge traditional banking institutions, offering innovative lending models and digital-first experiences. This report compares the current footprint of fintechs and banks in student lending and analyzes potential market shifts if federal loan guarantees were eliminated.

The student loan market continues to expand at a significant pace despite periodic concerns about sustainability. The private student loan sector alone was valued at $412.7 billion in 2023 and is projected to reach $980.8 billion by 2032, representing a compound annual growth rate of 10.1%15. Overall, the student loans market is growing at approximately 9.2% annually over the next five years7, indicating robust demand despite economic uncertainties and policy fluctuations.

Traditional banks maintain a significant but gradually diminishing presence in the student loan market. These institutions typically offer standardized loan products with competitive rates for students with established credit histories or qualified cosigners. Their underwriting processes tend to be more conservative than newer market entrants, focusing primarily on traditional creditworthiness metrics and income verification.

Among the major bank participants in student lending, Citizens Bank stands out for its nationwide offerings for undergraduate and graduate students, as well as parent loans. The bank distinguishes itself through its multiyear approval process, reducing the need for repeated hard credit inquiries for continuing students2. Other significant bank participants include PNC Bank, which offers specialized loans for health and medical professions, and Sallie Mae, a pioneer in private student lending that has evolved from its origins as a government-sponsored enterprise.

Financial technology companies have aggressively entered the student loan market, introducing innovations in product design, underwriting methodologies, and customer experience. These entrants typically operate with lower overhead costs than traditional banks and leverage alternative data sources for credit decisions, potentially expanding access to students who might not qualify under conventional underwriting standards.

SoFi represents one of the most prominent fintech lenders, distinguished by its no-fee structure and flexible repayment arrangements with fixed APRs ranging from 4.19% to 14.83%16. College Ave provides private student loans covering up to 100% of school-certified attendance costs with APRs ranging from 3.99% to 17.99%16. Ascent has gained market recognition for its non-cosigned loan options that use future income potential rather than current credit history as the primary underwriting criterion.

Marketplace platforms have emerged as important intermediaries in the student loan ecosystem. LendKey partners with credit unions and community banks, functioning as both a marketplace and loan servicer5. Credible allows borrowers to compare offers from multiple lenders through a single application and soft credit check, streamlining the shopping process for students and families5.

Based on the search results, the following represent key players in the current student loan market:

Citizens Bank - Offers multiyear approval and diverse loan options
PNC Bank - Specializes in healthcare profession loans and offers scholarship opportunities
Sallie Mae - Pioneer in student lending with undergraduate and graduate loan options
Discover - Provides comprehensive student loan offerings with competitive rates
Wells Fargo - Previously a major player but has exited the market
MEFA - Regional specialized educational lender
Education Loan Finance (ELFI) - The student loan division of SouthEast Bank
Custom Choice - Specialized private student loan provider

SoFi - Known for no-fee structure and comprehensive financial products
College Ave - Offers loans covering up to 100% of attendance costs
Earnest - Features borrower-friendly terms and competitive rates
Ascent - Specializes in non-cosigned loan alternatives
LendKey - Marketplace connecting borrowers with community banks and credit unions
Credible - Student loan comparison marketplace
MPower Financing - Focuses on international students
Juno - Group-based negotiation platform for better loan terms
Iowa Student Loan - Nonprofit state-based lender
EDvestinU - Nonprofit lender affiliated with New Hampshire Higher Education Loan Corporation
Stride Funding - Offers income share agreements and alternative financing models
CommonBond - Socially responsible student lender (not mentioned in results but a known market participant)

These institutions represent a mix of traditional financial services providers and newer, technology-focused entrants. The market continues to evolve with mergers, acquisitions, and strategic partnerships reshaping competitive dynamics.

The potential elimination of federal student loan guarantees would fundamentally alter the market landscape, likely causing significant contraction and restructuring. This change would transform both the size of the market and the nature of participating institutions.

Without federal guarantees, student lending would revert to pure risk-based lending principles, dramatically changing accessibility and terms. The current market structure exists largely because federal guarantees remove most default risk for lenders, enabling broader access to financing and more favorable terms than would otherwise be available.

A Reddit discussion highlighted this dynamic: "Making students loans not guaranteed and having it work like a real loan and with that allowing it to be bankruptible would seem like a good idea"10. However, this would mean loan approval would be "based on criteria such as the borrower's ability to repay within a reasonable time frame and their high school performance"10, fundamentally changing who could access education financing.

If federal guarantees disappeared, the market would likely undergo significant consolidation:

: Banks with substantial balance sheets and diverse revenue streams would have the greatest capacity to absorb increased lending risk. Among current participants, Citizens Bank, PNC Bank, and Discover would be best positioned to maintain student lending operations, though with substantially tightened criteria and higher rates.
: Only those fintechs with sophisticated risk assessment models, alternative revenue streams, or access to institutional capital would likely survive. SoFi, having diversified beyond student lending into banking, investing, and insurance, would be among the strongest contenders. Earnest, with its sophisticated approach to underwriting, and Ascent, which already specializes in future-earnings-based lending, might also persist.
: The market would likely shift toward income-based repayment models like those offered by Stride Funding, which ties repayment to future earnings rather than relying on traditional debt structures9. These models effectively shift some risk from borrowers to investors who bet on future earnings potential.

The student loan market would likely contract substantially from its current size, perhaps by 50-70%, as lenders would focus primarily on:

Students pursuing high-return degrees at prestigious institutions
Borrowers with exceptional credit profiles or financially strong cosigners
Fields of study with clear employment paths and strong salary prospects

The market might realistically shrink to 7-10 major players from the current diverse landscape. The following institutions would be most likely to maintain significant student lending operations:

Citizens Bank
PNC Bank
Discover
SoFi
Earnest
Ascent
Stride Funding or similar income-share agreement providers

Smaller regional banks, credit unions, and less-capitalized fintechs would likely exit the market entirely or dramatically reduce their student lending portfolios.

The removal of federal student loan guarantees would represent a fundamental restructuring of higher education financing in America. While it might address concerns about tuition inflation and excessive student debt, it would also significantly restrict educational access for many students, particularly those from lower and middle-income backgrounds.

Financial institutions with sophisticated risk assessment capabilities, substantial capital reserves, and diversified business models would be best positioned to remain in the market. The shift would likely accelerate innovation in alternative financing models, potentially leading to more alignment between educational costs and expected post-graduation outcomes.

For students, the changed landscape would require more careful consideration of educational investments, with greater emphasis on return-on-investment calculations for various fields of study and institutions. For higher education institutions, this shift would create strong pressure to demonstrate value and employment outcomes, potentially leading to significant changes in program offerings and pricing models.

This market transformation would ultimately test whether private financial markets alone can effectively finance broad access to higher education or whether some form of public support remains necessary to achieve societal goals of educational opportunity and economic mobility.

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