If you’re a college student or have student loans in repayment, 2025 may have been especially confusing. Between repayment plan shake-ups, federal aid adjustments, and the end of some relief measures, this year was full of changes that will impact student loan borrowers.
To help you make sense of all of the changes, here is a list of some of the biggest developments to student loans in 2025 — and how they will impact you.
The 7 Biggest Changes to Paying for College in 2025
1. Collections Activity Re-started
Who It Affects: Federal student loan borrowers who were in default on their loans
During the COVID-19 pandemic, several relief measures were put into place to help borrowers. Payments froze, and consequences for defaulting on your loans were paused. Even after payments resumed, borrowers had an “on ramp” period to get back on track with their payments before they had to worry about penalties for missing payments.
In May 2025, the U.S. Department of Education restarted the consequences for defaulting on your student loans, including:
- Collections activities
- Negative credit reporting
- Wage garnishment
- Treasury offset (meaning the federal government can take your tax refund, Social Security benefits, and other federal benefits to repay your loans)
Borrowers in default (or at risk of default) should contact their loan servicer to find out what repayment options are available to them.
2. The SAVE Plan Ended
Who It Affects: Federal loan borrowers who enrolled in the SAVE repayment plan
The Biden Administration announced the Saving on a Valuable Education (SAVE) plan to offer student loan borrowers lower payments and a quicker path to loan forgiveness. However, legal challenges immediately were filed, and SAVE borrowers were put into forbearance while those legal issues were handled.
The interest-free forbearance ended in August 2025, and borrowers are encouraged to enroll in a new repayment plan. As of the end of 2025, borrowers can enroll in income-contingent repayment (ICR), income-based repayment (IBR), and Pay As You Earn (PAYE). You can apply for a new plan online.
3. New Loan Limits Were Announced
Who It Affects: Current and future college students and parents of college students
President Trump’s One Big Beautiful Bill (OBBB) changed the borrowing limits for the following loans:
- Direct Unsubsidized Loans for Graduate Students: $20,500 per year ($100,000 aggregate limit)
- Direct Unsubsidized Loans for Professional Students: $50,000 per year ($200,000 aggregate limit)
- Parent PLUS Loans: $20,000 per year, per child ($65,000 aggregate limit)
The new loan limits will apply to loans disbursed on or after July 1, 2026. For students whose programs exceed those loan limits, they will need to explore other financing options, such as scholarships, grants, or private student loans.
4. Grad PLUS Loans Were Eliminated
Who It Affects: Students planning to pursue master’s or doctoral degrees
Previously, students could use federal Grad PLUS Loans to cover up to 100% of the total cost of attendance of their graduate or professional program. However, the OBBB ended the Grad PLUS Loan program, so students who take out loans on or after July 1, 2026, will not be eligible for those loans; the only option will be federal Direct Unsubsidized Loans, and they will be subject to the new loan limits.
5. A New Default Payment Plan Was Announced
Who It Affects: New federal loan borrowers
The standard repayment plan is based on fixed monthly payments and a 10-year repayment term. The OBBB introduced a new default that uses a tiered schedule based on the borrowers’ loan balances:
| Loan Balance | Loan Term |
| Under $25,000 | 10 years |
| $25,000 to $49,999 | 15 years |
| $50,000 to $99,999 | 20 years |
| $100,000 or more | 25 years |
The new plan will apply to borrowers who take out new loans — even if they have existing federal loans — on or after July 1, 2026.
6. A New Repayment Plan Was Created
Who It Affects: Undergraduate and graduate borrowers
The OBBB phases out the current student loan repayment plans, and it replaces them with a new plan: the Repayment Assistance Plan (RAP). Under the RAP, all borrowers must pay at least $10 per month, and their new monthly payment amounts are based on their income (minus $50 per dependent):
| Income | Percentage of Adjusted Gross Income (AGI) |
| $0 to $10,000 | Not applicable; flat $10 payment |
| $10,001 to $20,000 | 1% |
| $20,0001 to $30,000 | 2% |
| $30,001 to $40,000 | 3% |
| $40,001 to $50,000 | 4% |
| $50,001 to $60,000 | 5% |
| $60,001 to $70,000 | 6% |
| $70,001 to $80,000 | 7% |
| $80,001 to $90,000 | 8% |
| $90,001 to $100,000 | 9% |
| $100,000 and up | 10% |
The new plan has an extended repayment period; borrowers will be in repayment for up to 30 years. The RAP will be available starting on July 1, 2026.
7. Tax-Exempt Student Loan Forgiveness Ended on Some Programs
Who It Affects: Direct loan borrowers pursuing loan forgiveness under an income-driven repayment (IDR) plan
Under an IDR plan, borrowers could qualify for loan forgiveness if they made payments for 20 or 25 years and still had a remaining balance. Thanks to the American Rescue Plan of 2021, student loan borrowers could qualify for loan forgiveness through IDR plans without worrying about income taxes at the federal level; the American Rescue Plan made loan forgiveness tax-exempt.
The American Rescue Plan expires at the end of 2025, so borrowers who qualify for forgiveness will have to pay income taxes on the forgiven loan amount.
[Important: Loan forgiveness under Public Service Loan Forgiveness (PSLF) will still be tax-exempt.]
Staying Up to Date
Financial aid, higher education, and student loan systems underwent significant changes in 2025, with some payment plans ending, new ones launching, and tax rules expiring. Some changes will help borrowers, but some did create new challenges. Understanding the changes and when they go into effect can help you prepare and plan ahead.
You can follow ELFI’s blog for the latest news on student loans, and you can also use the Department of Education announcement page to view the latest updates.
