What Is (and What’s Not) Happening with Student Loans Right Now

Among many other questions inspired by the rapid fire actions of President Donald Trump’s second term, many Americans are asking What’s going on with student loans??

During his tenure, former President Joe Biden launched several plans for broad and targeted student loan relief, inviting critique and legal challenges from Republican-led states and organizations. Biden’s first attempt at forgiveness for low-income borrowers was stopped in court, and his second attempt at broad forgiveness was delayed and subsequently abandoned by the new administration.

Biden’s second relief action, the implementation of the Saving on a Valuable Education (SAVE) plan for lower-cost income-driven repayment, has been tied up in courts since last fall. Around 8 million borrowers were able to qualify for the plan before it was put on hold. 

“It’s likely the SAVE plan is dead,” says Robert Farrington, student loan expert and founder of The College Investor. “It’s already been removed as an eligible plan from the IDR application.” 

Recent headlines about student loan court cases and actions against the Department of Education, jumbled among the administration’s other actions, make it tough for borrowers to parse exactly how student loan debt will impact our finances going forward.

While some big questions are still unanswered, here’s an overview of the state of federal student loan repayment right now.

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Income-Driven Repayment Plans Are Still in Effect

Some folks mistakenly believe income-driven repayment (IDR) has been eliminated, but it hasn’t. Plans changed when the Biden administration enacted the SAVE plan, and some elements of these plans are in dispute. But if your loans are already in one of these income-driven repayment plans, it’s still valid for the time being, even if your particular plan is in forbearance:

• Pay As You Earn (PAYE)
• Income-Contingent Repayment (ICR)
• Income-Based Repayment (IBR)
• Saving on a Valuable Education (SAVE)

What’s new:

• SAVE court action: The SAVE plan is being challenged in court and is effectively on hold until decisions are made. While it’s on hold, loans already in SAVE are in an interest-free forbearance — you don’t owe a monthly payment, and your loans don’t accrue interest.
• IDR applications are being processed again: The IDR application is back online, so borrowers can apply for these plans – except for the SAVE plan which has been removed. Initially, the applications were open but weren’t being processed. However, IDR processing is back in action as of May 10, 2025. Farrington says that it may take anywhere from six to eight weeks for loan processors to catch up on the backlog of applications, though.
• IDR forgiveness is on hold: A court order in February prevents ED from granting forgiveness after the 20- or 25-year period stipulated under SAVE, PAYE or ICR. You’ll be moved into interest-free forbearance if you reach the forgiveness milestone for those plans during this hold. (IBR was created by a separate act of Congress that’s unaffected by the court order, and forgiveness is still being processed for that plan.)

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Public Service Loan Forgiveness Is (Technically) Untouched

Public Service Loan Forgiveness, the relief program for teachers, nurses and other government or nonprofit workers, has been a target for reform by Republicans in Congress. But they haven’t made a move on the program yet.

You can still apply for PSLF once you’ve made 120 qualifying payments (10 years of repayment). Even though your loans must be in an IDR plan to qualify for PSLF, this program is unaffected by the court order blocking forgiveness for IDR plans, because “forgiveness” is explicitly laid out in the law that created it.

What’s new:

• Loans in SAVE could be in limbo: Months spent in forbearance don’t count toward your 120 payments. If you’re due to be eligible for forgiveness in the next few months and your loans are in forbearance under SAVE or for any other reason, consider moving to another payment plan to continue your progress.
• PSLF buyback: If you’ve reached 120 months of qualifying employment but your loans were in forbearance or deferment for any of that time because of the pandemic pause or court orders, you can “buy back” credit by paying what you would have owed during those months, so you can apply for forgiveness. If your payments would have been $0 during those months, you can still apply for the buyback program to be moved toward forgiveness.
• Customer service might be hard to come by: The first borrowers became eligible for forgiveness under PSLF during Trump’s first term, and we can extrapolate from that experience that administration of this program is likely to be haphazard. Less than 2% of applicants were approved for forgiveness under Trump. The program was overhauled in 2021, and the Biden administration granted forgiveness to more than 1 million borrowers. Keep your own clear records of eligible employment and payments, and prepare financially to continue payments in case forgiveness takes longer than expected.

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The Department of Education Is Intact but Hindered

Trump’s executive order:

On March 20, Trump signed an executive order instructing the Education Secretary “to the maximum extent appropriate and permitted by law, take all necessary steps to facilitate the closure of the Department of Education.”

Neither the president nor anyone in the administration has the legal authority to eliminate the Education Department, because the agency was created by an act of Congress. The Associated Press reported that Republican lawmakers said they’ll introduce legislation to close the department, while Democrats promise to oppose it.

A statement from Secretary of Education Linda McMahon suggested ED will continue to support student loan programs, saying the department “will continue to support K-12 students, students with special needs, college student borrowers, and others who rely on essential programs.”

However, the order itself said the Education Department “must return bank functions to an entity equipped to serve America’s students.” The order is otherwise brief and doesn’t include any details on how McMahon might legally facilitate the closure of the department outside of an act of Congress.

What changes might actually come for student loans is unclear at this point. ED, in fact, doesn’t operate like a bank, as the order suggests. Student loans are managed by servicers dedicated to that purpose that coordinate with the department. Farrington said this means nothing much has changed with most student loan processes as a consequence of the order.

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Layoffs at ED:

Layoffs are a bit of a different story. Prior to the executive order, on March 11, ED announced a “reduction in force” that placed nearly half of the department’s employees on administrative leave beginning March 21 and immediately removed them from their offices due to an alleged security concern.

The announcement of these layoffs was quickly met with a lawsuit against McMahon, which had a hearing in late April but is awaiting an official ruling. For context, several other actions by this administration are being challenged in court. 

Student loan experts have expressed concern about the department’s ability to continue to process loan, repayment plan and forgiveness applications with a hobbled workforce. You’ll still rely primarily on your servicer for any questions, but there are certain processes handled directly by ED which are actively impacted.“This includes things like consumer complaints, PSLF buyback, final PSLF forgiveness processing, and more,” Farrington said. “These functions are seeing significant delays.”

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Student Loan Delinquencies Are Hitting Credit Scores (Hard)

Some federal student loan borrowers have seen their credit scores unexpectedly plummet since Feb. 1.This marked the first day servicers started reporting missed payments since payments were paused due to the pandemic in March of 2020.

That pause ended in October of 2023, but ED under Biden implemented a 12-month “on-ramp” period in which payments were due, but missed payments wouldn’t carry the usual consequences — including credit reporting. That on-ramp period ended on Sept. 30 of last year, so servicers started tallying missed payments as usual. After 90 days, loans are considered delinquent, and servicers can report that to credit bureaus. That 90-day period would have hit at the end of January.

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The Difference Between Delinquency and Default

“Delinquency is being late on your payments,” explains Farrington. “When you’re delinquent, your loan servicer will try to work with you to get you current.”

However, once you hit 270 days late on your loan payments, you’re now in default. When you’re in default, your account can end up in collections, which means you might get your paycheck garnished in addition to any tax refunds or Social Security benefits. 

“Some borrowers think that default is the only option because they can’t afford their loans,” Farrington continues. “The sad part is that default is way more costly [than setting up a payment plan in delinquency or getting on an IDR plan]. Beyond impacting your credit [which makes] things like insurance, loan payments and more even costlier, the collection costs and late fees will keep making your loans grow.”

If you’re in delinquency, work with your loan servicer to set up payments you can afford before you hit the 270-day mark. You can also explore getting on an IDR plan. Farrington points out that if you’re low-income, your payments on an IDR plan could be as low as $0 per month.

Steps to take

If you’re worried about the impact of student loan payments on your credit score, here’s what you can do:

• Check your credit report on www.annualcreditreport.com to see if a student loan delinquency has been reported. This government-endorsed website allows you to check your report for free through each of the three credit reporting bureaus once per week.
• Check your account with your student loan servicer for the status of your loans. You can find out which company services your loans here. This can help you identify late payments before you hit the 90-day reporting mark.
• If your loans are delinquent, work with your servicer on a plan to get them current before they go into default. You can usually get loans out of delinquency with a monthly payment that’s much lower than your current payment plan.

What is the Repayment Assistance Plan? 

The Repayment Assistance Plan (RAP) is a proposal by Republican lawmakers to revamp student loan repayment options. It would gut all IDR plans except IBR plans, and replace them with a new format which would apply to borrowers who took their loans out after July 1, 2026. Once you are locked into the new RAP, you would never be able to change your mind and apply for a different repayment plan. 

The RAP would permanently close the book on SAVE, and is a more expensive option than the SAVE plan was. However, it’s not worth getting into the details and confusing yourself over it until it passes into law. For now it’s just a proposal, and there’s enough other noise in this space to consider without delving into hypotheticals. 

That’s not to say it’s unlikely to pass. Farrington says we can expect firmer details in the fall if it does indeed make it through as a part of the budget reconciliation process.

Where to Find Help with Student Loans

We’re still waiting for final information on the fate of SAVE plans, forgiveness under IDR, how PSLF will shake out during this term and whether various actions against ED will stand up in court.

In the meantime, keep an eye on the monthly payments you owe. Contact your servicer if you have any questions about your repayment plan or status. Log into your account with your servicer, and make sure your contact information (especially your email address) is up to date — this is the best way to get updates on any actions that impact the status of your loans.

For the latest updates on SAVE actions, check studentaid.gov/saveaction.

For help with applying for and repaying student loans, get free advice and guidance from experts at The Institute of Student Loan Advisors.

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Dana Miranda is a Certified Educator in Personal Finance and author of YOU DON’T NEED A BUDGET. She writes Healthy Rich, a newsletter about money for misfits.

Pittsburgh-based writer Brynne Conroy is the founder of Femme Frugality, DISABILIFINANCE and the author of “The Feminist Financial Handbook.” She is a regular contributor to The Penny Hoarder.