It’s been a confusing stretch for many federal student loan borrowers as collections activity has shifted and key repayment and forgiveness rules have remained unsettled, the Associated Press reported. The Education Department has delayed involuntary collections for borrowers in default until the department finalizes its new repayment plans, while borrowers also face uncertainty tied to litigation over forgiveness-related repayment options and a separate set of proposed changes for graduate borrowing and Public Service Loan Forgiveness eligibility.
A major complication involves the SAVE repayment plan. After a legal challenge, the U.S. Court of Appeals for the 8th Circuit ordered the plan ended, leaving borrowers who were enrolled in SAVE needing to be moved to another repayment option. Winston Berkman-Breen, legal director at Protect Borrowers, said that “Seven and a half million borrowers who are currently enrolled in SAVE need to be moved to another plan.” The Education Department is expected to develop a transition plan, while borrowers are also being told to stay proactive about enrolling in other repayment plans.
In the meantime, borrowers who are looking to enroll in an income-driven repayment plan have several options available, according to the AP reporting. The income-driven plans discussed include the Income-Based Repayment plan, the Pay as You Earn plan, and the Income-Contingent Repayment plan. Berkman-Breen said the plans have “similar criteria” and that “Your payment is set as a percentage of your income, not how much you owe,” which typically results in a lower payment. The AP also noted that when borrowers apply to switch plans, processing can take longer for some applicants.
For borrowers who are working toward Public Service Loan Forgiveness, the AP reported that there are “no changes” to the program yet, even as the administration has proposed adjustments for participating nonprofits. The Trump administration has sought to change eligibility requirements for nonprofits by adding a standard intended to disqualify nonprofit workers if their work is deemed to have “substantial illegal purpose.” The proposal would define illegal activity to include trafficking or “chemical castration” of children, illegal immigration, and supporting foreign terrorist organizations, a change critics say would turn the forgiveness program into a tool of political retribution, while supporters say it is needed to keep taxpayer money from going to lawbreakers.
Kate Wood, a lending expert at NerdWallet, said the uncertainty itself is hard for borrowers to plan around. She said, “This is something that obviously is very stressful, very nerve-wracking for a lot of people, but given that we don’t know exactly how this is going to be enforced, how these terms are going to be defined, it’s not really something that you can try to plan ahead for now.” Wood recommended that borrowers enrolled in the PSLF program continue making payments while the policy is challenged; she said the proposal is being challenged by 20 Democrat-led states and is expected to take effect in July.
The Education Department has also been holding involuntary collections for borrowers in default. Under the federal rules described in the AP report, borrowers are considered in default when they are at least 270 days behind on payments, and federal consequences can include wage garnishment and withholding federal tax refunds. If borrowers are in default, the AP report said they can contact their loan holder to apply for a loan rehabilitation program, a process Wood said creates a reduced payment schedule; after five successful payments, wage garnishment would cease.
Graduate students and borrowers planning higher education face additional changes through Trump’s “Big Beautiful Bill,” the AP said. The proposal would raise new borrowing limits for graduates, with new caps that depend on whether a program is classified as graduate or professional. Wood said that if borrowers start a new program and take out a loan after July 1, the new limits would apply, and the AP report said professional-program borrowers would be limited to $50,000 per year and $200,000 total. For other graduate students, such as those pursuing nursing and physical therapy, the limits would be $20,500 a year and $100,000 total, according to the AP report. The Education Department is defining which fields qualify as professional programs, including pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, and theology.
Finally, borrowers who want to change how their debt is managed can also consider consolidation. The AP report said the online application for loan consolidation is available at studentaid.gov/loan-consolidation, and that borrowers with multiple federal student loans can combine them into a single loan with a fixed interest rate and one monthly payment. The report said consolidation typically takes around 60 days to complete and that borrowers can consolidate their loans only once.