Trump Reduces Student Loan Interest Amid College Debt Crisis

While Bloomberg pledged a $20 million initiative for Black students and California has offered free tuition under a new program, the president took a different direction.

Last Thursday, President Donald Trump announced the Department of Education was cutting interest rates on student loans. The move is said to make higher education more affordable and may help Gen-Z stay afloat while they try to find employment. 

Per the Education Data Initiative’s numbers, the average “federal student loan debt balance is $39,547, while the total average balance (including private loan debt) may be as high as $43,333.”

For medical students, the situation is even more bleak. According to the Education Data Initiative, the average medical school debt balance in 2025 is $216, 659 among new indebted graduates.

In response, the government is issuing a temporary 1% reduction in student loan interest rates, with it being offered to those struggling with student loan repayment.

The Department of Education has shared that on July two new repayment plans will be available, and those plans will be the income-driven Repayment Assistance Plan (RAP) and the Tiered Standard repayment plan, according to News4Jax.

According to Los Angeles Magazine, each borrower is saving less than they’d hoped for. Under RAP, payments are to be reduced by $50 per dependent on the borrower. Even then, there are some heavy asterisks involved, such as specific requirements and types of borrowers that this applies to. 

The News4Jax further explained that with the reduced interest rate, those who borrowed Federal Direct Loans that originated after July 1, 2012, will greatly benefit from the adjustment.

Also, the former student and parent borrowers who were enrolled in auto pay under the now-defunct SAVE [Saving on a Valuable Education] Plan from former President Joe Biden’s administration will now have options starting next month.

There are two prongs through which this is being done. The first is the Repayment Assistance Plan (or RAP for short), which functions based on income, and the other type of help is the Tiered Standard plan. 

Through RAP, burrowers’ monthly payment is predicated on income and the number of dependents, allowing burrowers to have affordable monthly payment options to ensure repayment obligations are met.

Compared to IDR (Income Driven Repayment) plans, RAP makes sure that borrowers who can make full monthly student loan payments on time won’t run into accruing more interest, thus being able to progress toward reducing their loan’s principal balance.

Meanwhile, the new Tiered Standard Repayment plan will have 10, 15, 20, or 25 years of fixed terms based on the borrower’s total outstanding loan balance, meaning that borrowers with higher debt can have lower monthly payments and more time to repay.