By Annelise Capossela for NPR
Borrowers spent most of 2025 trying to keep up with dizzying changes in the federal student loan system.
The Trump administration and Congress are currently rethinking everything from how much Americans can borrow to how quickly they must pay it back.
Here’s what you should know as we enter the new year:
President Biden’s SAVE plan is ending
The U.S. Department of Education announced in early December that it had reached a proposed settlement agreement to end the popular but controversial Biden-era student loan repayment plan known as SAVE.
The Value Education Savings plan “has been the most affordable, generous and flexible plan for millions of student loan borrowers,” says Persis Yu of the liberal group Protect Borrowers.
But it was so affordable, generous and flexible — with quick loan forgiveness and monthly payments as low as $0 for low-income borrowers — that Republican attorneys general sued the Biden administration for overstepping its authority.
The legal challenges put SAVE borrowers in limbo for months, during which they did not have to pay their loans. Interest started to accrue in August.
This new deal, pending court approval, would end a long legal battle by ending SAVE itself.
“The law is clear: if you take out a loan, you have to pay it back,” Deputy Education Secretary Nicholas Kent said in a statement announcing the proposed deal. “American taxpayers can now be assured that they will no longer be forced to serve as collateral for illegal and irresponsible student loan policies.”
Under the deal, the Department of Education would commit to moving the roughly 7 million borrowers still enrolled in SAVE into other repayment plans — though some of those plans are also in flux.
Whether you blame Biden or the Republicans for SAVE’s downfall, Betsy Mayotte, founder of the Institute of Student Loan Counselors (TISLA), says it will really bind borrowers.
“People who were making other financial decisions based on what they thought their payment was going to be in a SAVE plan — they’re in trouble,” Mayotte says. “The payment plan has never been challenged in court and has never been withdrawn by existing borrowers.”
Now, Mayotte says those roughly 7 million SAVE borrowers will have to change plans and find a way to afford higher monthly payments.
Complications for borrowers working toward public service loan forgiveness
Liz Kilty, an oncology nurse in Portland, Ore., had a SAVE plan from the start.
“As soon as SAVE was an option, I signed up for it,” says Kilty, who works in a public hospital and wanted to keep her monthly payments reasonably low on her way to PSLF.
Since 2007, PSLF has offered borrowers who work in public service — including teaching, nursing and policing — the option to have their loan balances wiped out after 10 years on the job.
Kilty has $36,000 in outstanding debt and 15 payments to make before he can receive loan forgiveness.
But SAVE’s legal troubles have slowed her down: Since her payments were frozen, so has the progress she could make toward forgiveness. “I was like, ‘Are you kidding me?’ Like, ‘This is the year I’m going to be done, and this is the year they screw it up?’ I waited ten years [for forgiveness] and now it could go wrong and you’re just helpless.”
Earlier this month, Kilty asked for PSLF Buybackto make the remaining 15 payments in one lump sum and eventually qualify for the balance to be forgiven.
One of the reasons PSLF is still an option for the Kilts and other borrowers is because it was created by Congress.
The Trump administration does not have the authority to stop PSLF — but it has been working to change the rules. Effective July 1, 2026, the department says it will deny loan forgiveness to workers whose government or nonprofit employers engage in activities with a “substantial unlawful purpose.” The task of defining a “substantial unlawful purpose” will fail, not the courts, but the Secretary of Education.
In November, the cities of Boston, Chicago, San Francisco and Albuquerque, NM sued the Trump administration over these PSLF changes.
The complaint alleged that a city or county government’s opposition to the administration’s immigration actions, for example, could lead the secretary to exclude that government’s civil servants — including a local nurse like Kilty — from loan forgiveness.
Installment plans change
SAVE aside, trying to change the repayment schedule in 2026 will be weird.
That’s because, as part of the One Big Beautiful Bill Act (OBBBA), Republicans also decided to phase out two other popular, more affordable plans: Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE). Both payments are based on the borrower’s income and both will end in mid-2028.
Current borrowers can still technically enroll in these plans — for now. Another income-adjusted plan to consider—one that’s going nowhere—is income-based repayment (IBR).
You can find a handy list of all these plans and compare your monthly payments at the Department of Education Loan simulator.
Congress also used OBBBA to create two new repayment plans, beginning July 1, 2026, that will replace all current options for new borrowers.
1. Standard plan
Under this new standard plan, new borrowers would agree to a repayment period of between 10 and 25 years, depending on the size of their debt, with what they owe, plus interest, divided into the same monthly payments as a home mortgage.
Under this planborrowers with larger debts would be entitled to a longer repayment period.
2. Repayment Assistance Plan (RAP)
For borrowers who worried they weren’t earning enough to cover the standard plan’s rigid monthly payments, Republicans created RAP for both future and current borrowers.
Payments would be based for the most part on borrowers’ total adjusted gross income (AGI), and the department will waive any interest left over after the borrower makes the monthly payment. Result: Borrowers in good standing will no longer see their loans growth.
In reality, Republicans want to make sure borrowers see their balances gone down every month. For those whose monthly payments are less than $50, the government will match whatever they pay and apply it to the principal.
While other plans offer forgiveness of remaining debt after 20 or 25 years, the RAP would delay that for 30 years. That’s a big difference, says Preston Cooper, who studies student loan policy at the conservative American Enterprise Institute (AEI).
Borrowers with typical debt levels “and typical incomes for their college level will almost always pay off before they hit the 30-year mark,” says Cooper. “So if you’re going to RAP, I wouldn’t think about forgiveness because you’re probably going to pay for it.
From July 1, 2026, new loans will be subject to new borrowing limits
We’ve covered big changes in repayment, but there have also been big changes in how much graduate students can borrow. (College students will see no changes.)
The new limits will make it more difficult for lower- and moderate-income borrowers to attend graduate school. Republicans are turning off the power PLUS grade program that allows students to borrow up to the cost of their degree.
“Colleges could simply raise the price, pass the cost on to students, and the federal government would have to write a check through the federal student loan program,” says Cooper. “This system was completely unsustainable and I fully understand why Congress decided to end it.”
After July 1, graduate student borrowing will be capped at $20,500 per year. Ideally, Cooper said, this would prompt some schools to lower their prices.
But until they do, Persis Yu of Protect Borrowers says many students will face a serious funding gap between their federal loans and the actual cost of graduate school.
“Students will have to bridge the gap with some other type of financing,” says Yu, “and many students will have to turn to the private student loan market.”
TISLA’s Mayotte says he thinks some schools will drop some degree programs.
“I had a bad feeling in my stomach when this bill passed because I don’t think it’s going to lower the cost of education like members of Congress think it could,” Mayotte says.
Borrowers who are working toward a professional graduate degree (think medicine or law) will have their loans capped at $50,000 per year.
Parents and caregivers who use Parent PLUS Loans to help students pay for college will also see new loan limits. They will be capped at $65,000 per child.
“Abyss of the Default Cliff”
Amidst all these changes, data shows that millions of borrowers are struggling to keep up with their payments.
Preston Cooper at AEI recently published an analysis of the latest federal student loan data, and the results were sobering: 5.5 million borrowers in default, another 3.7 million more than 270 days behind on their payments and 2.7 million in the early stages of delinquency.
“Currently, we have about 12 million borrowers who are either in default or delinquent,” says Cooper.
That’s more than 1 in 4 federal student loan borrowers — the crisis is raising bipartisan alarm.
Persis Yu of Protect Borrowers warns that America is on the “precipice of a default cliff.”
Mayotte adds: “I really think we’re headed for a historic failure rate for some time.”
Meanwhile, the Department of Education has confirmed it plans to resume wage garnishment for defaulting borrowers in early 2026.
And so, heading into 2026, the big question hanging over the Trump administration and Republicans in Congress is: Can all the changes they’ve made help these borrowers get back into good standing? Or do default numbers snowball into an avalanche?
Editing: Nicole Cohen
Visual design and development: LA Johnson
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