Millions of student loan borrowers are contending with seemingly constant changes to repayment and loan forgiveness programs. But even more major disruptions to student loans are on the horizon. And in some cases, borrowers will have to take affirmative steps (or steer clear of certain actions) to retain key benefits or avoid pitfalls that might have lasting consequences.
Many of these changes to student loan programs and benefits will happen on or after specific dates over the course of the next three years. Here’s a breakdown, and what borrowers need to know.
Tax Changes For Student Loans At The End of 2025
Most forms of debt cancellation are typically treated as taxable events, resulting in the issuance of a tax form that requires borrowers to report the amount of cancelled debt as income for tax purposes. That can result in serious tax liability for borrowers receiving student loan forgiveness or other forms of debt cancellation.
During the last four years, federal student loan borrowers have been shielded from tax liability associated with loan forgiveness by a provision of the American Rescue Plan Act that President Joe Biden enacted in 2021. But that relief expires at the end of this year, and Republican lawmakers in Congress declined to extend it. That means that student loan forgiveness goes back to being taxable again starting on January 1, 2026 (although certain forms of profession-based discharges, such as Public Service Loan Forgiveness, should remain tax-free federally).
Last week, a federal court approved an agreement between a national teachers’ union and the Department of Education over stalled or blocked student loan forgiveness under income-driven repayment plans. Under the terms of that agreement, the department will resume processing loan forgiveness under the IBR, ICR, and PAYE plans for borrowers who have reached the 20- or 25-year milestone required to receive a discharge. The department further agreed that borrowers who become eligible for loan forgiveness under these plans during 2025, but don’t actually receive a discharge until 2026, will not be required to report the amount of cancelled debt as income for federal tax purposes. However, SAVE plan borrowers must apply to switch to IBR, ICR, or PAYE before the end of this year in order to receive that tax protection.
Major Changes To Student Loans In 2026
Some of the most significant changes to federal student loan programs in a generation are set to go into effect by July 1, 2026. These include:
- The launch of the Repayment Assistance Plan, or RAP, which was created under the One Big, Beautiful Act signed by President Donald Trump in July, is expected to occur by July 1, 2026. RAP may have lower monthly payments than the older ICR and IBR plans, but is likely to be more expensive than SAVE and PAYE for many borrowers. RAP will have an interest subsidy to prevent loan balances from ballooning over time, but will also require that borrowers remain in repayment for 30 years before they can qualify for student loan forgiveness; that’s far longer than the 20- or 25-year repayment terms for the current income-driven repayment options. Some advocacy groups have characterized RAP as a “debt trap.”
- Borrowers who take out any new federal student loans, or consolidate their existing loans, on or after July 1, 2026 would lose access to “legacy” repayment plans that are being phased out under the One Big, Beautiful Act. These borrowers would only be able to access RAP or a new tiered Standard repayment plan (which requires payment in full within 10 to 25 years, depending on the balance).
- Parent PLUS borrowers must consolidate their loans through the federal Direct consolidation loan program before July 1, 2026 (if they haven’t already done so) to maintain access to income-driven repayment plans. If Parent PLUS borrowers don’t consolidate by this date, they will be completely cut off from affordable payments as well as student loan forgiveness under income-driven plans and PSLF.
- New rules being created by the Trump administration to restrict student loan forgiveness under the PSLF program are expected to be implemented by July 1, 2026. Under these proposed regulations, nonprofit organizations and state or local governments could become ineligible for PSLF if they engage in activities that have a “substantial illegal purpose,” which the Department of Education has defined to include facilitating the violation of federal immigration laws, providing certain medical services to youth who identify as transgender, and engaging in certain forms of discrimination. Critics have argued that the regulations would allow the Trump administration to use PSLF to punish organizations and state or city governments that have missions or directives that conflict with administration policy goals. Legal challenges are expected.
- Significant federal student aid changes are expected to begin in July 2026, including the sunsetting of the Graduate PLUS program and new limits imposed on Parent PLUS borrowing.
Additional Changes To Student Loans In 2027
A few more changes under the One Big, Beautiful Act are expected to go into effect on July 1, 2027. Under the legislation, new federal student loans originated on or after this date will have more limited options to postpone or pause payments during times of hardship.
“Borrowers that take out loans after July 1, 2027 will not be able to use the economic hardship or unemployment deferments to pause payments if they cannot afford them,” said the National Consumer Law Center in a blog post from earlier this summer. “In addition, borrowers will only be able to be in many forbearances for up to 9 months during a 2-year period. These new limits on postponing payments in times of financial distress, combined with eliminating $0 payments for new borrowers living in or near poverty, mean that financially distressed borrowers will have fewer options to avoid falling behind and into default.”
Current student loan borrowers in repayment will maintain access to current deferment and forbearance options, as long as they don’t take out any new federal student loans on or after July 1, 2027.
Final Changes To Student Loans In 2028
The last pieces of the One Big, Beautiful Bill Act are set to go into effect by July 1, 2028.
- The SAVE, ICR, and PAYE plans will be phased out by July 1, 2028. At that point, borrowers in these plans will need to apply to switch to either IBR or RAP if they haven’t already done so. If they don’t, they will be automatically put into the Standard plan, instead, which could be prohibitively expensive for some borrowers. The department confirmed that borrowers will be able to maintain access to ICR and PAYE for now, although SAVE could be phased out earlier than 2028 if the program is struck down by a federal court as expected.
- Parent PLUS borrowers who have consolidated their loans via the Direct loan program by July 1, 2026 would need to take additional steps by July 1, 2028 to maintain access to income-driven repayment plans and student loan forgiveness, including through PSLF. These borrowers must first enroll in the ICR plan, make at least one payment, and then apply to switch to IBR. If borrowers don’t jump through those hoops, they could forever lose access to affordable payments and any possibility of loan forgiveness.
Ultimately, borrowers should familiarize themselves with these key dates, and be prepared to take action on their student loans as needed to comply with key requirements. Failure to do so could jeopardize their access to critical repayment and student loan forgiveness programs, including potentially PSLF. And borrowers should also be careful about consolidating existing federal loans or taking out new federal loans in 2026 or beyond, as that could limit options for all of their student loans.
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