Student Loan Payment Changes Ahead in 2025

As 2025 approaches, and with it a new change in the leadership of the federal government, student loan borrowers will experience major shifts in how their debt will be recovered.

The current administration has allowed borrowers to experience low or no repayments, enhanced pathways to forgiveness, and interest-free deferments. However, all that can change once Donald Trump takes office.

Per Newsweek, the federal government has confirmed it will restart collections on federal student loans in 2025. This payback program comes on the heels of the government’s coronavirus forbearance period, which spanned from March 2020 to September 2023.

The forbearance package halted collection activities on defaulted federal student loans. This was later expanded to include an additional one-year “on-ramp” for repayment. During this period, interest continued to accrue on student loan balances, but borrowers who missed payments avoided entering default status.

Joe Biden enacted the Saving on a Valuable Education (SAVE) plan to help reduce student loan debt. But this plan hangs in the balance once Donald Trump takes office in January 2025. “As we head into 2025, borrowers find themselves in a really difficult position, and facing tremendous amounts of uncertainty,” attorney and founder of the Student Loan Sherpa, Michael Lux, told Newsweek. “Millions of borrowers signed up for the SAVE repayment plan, and the vast majority of them should expect to see their payments increase. SAVE as we know it is unlikely to survive.”

“Borrowers enrolled in the SAVE Plan will be placed in an interest-free forbearance while our Administration continues to vigorously defend the SAVE Plan in court,” said Miguel Cardona, the Secretary of Education, in an August statement.

Student Loan Borrowers Could See Their Tax Refunds, Wages, and Social Security Checks Garnished

Your Student Loan Payments May Go Up In 2025 As Loan Forgiveness Paths Narrow https://t.co/ruqtM7Eigh pic.twitter.com/pAxA47kZbq

— Forbes (@Forbes) December 1, 2024

For those who do not enter into repayment plans, MarketWatch reports that a shock to the wallet may be ahead for borrowers who cannot pay their loans back. That could include seeing their tax refunds, wages, and social security checks garnished as part of the payback program.

Tia Caldwell, a senior policy analyst at New America, said, “We’re looking at a bunch of families and borrowers who are all of the sudden going to be losing part of their wages, part of their Social Security, and even all of their tax refund. It’s going to be a hardship.” 

Caldwell continued, “We think some borrowers won’t know that they’re in default because, after four and a half years of not experiencing collections, you might just forget or think that some statute of limitations has taken care of your debt.”

Full repeal of all existing loan forgiveness programs is not a foregone conclusion, and even if a repeal does happen, current borrowers could be grandfathered in. While the incoming Trump administration could make some changes, a repeal of the program is not possible without Congress.

On Dec. 20, 2024, the Department of Education announced that the Joe Biden, Kamala Harris administration approved $4.28 billion in additional student loan relief for 54,900 borrowers across the country who work in public service. This relief brings the total loan forgiveness by the Administration to approximately $180 billion for nearly 5 million Americans, including $78 billion for 1,062,870 borrowers through PSLF.