3 Things Borrowers Should Do

Major changes are in store for student loan borrowers this year, as the Education Department takes steps to implement the One Big, Beautiful Bill Act (OBBBA) that congressional Republicans passed last summer.The OBBBA will make massive changes to federal student loan programs, directly impacting repayment options as well as student loan forgiveness.Last month, the department published sweeping proposed regulations in the Federal Register that will transform federal student loans.The publication of the new rules does not mean they are in effect yet, but it serves as a clear indication of where things are heading.

With such significant changes on the way, many borrowers will need to take action on their loans in the coming weeks and months.Here’s a breakdown of what federal student loan borrowers should be doing.If you’re in the SAVE Plan, start exploring repayment options The Saving on a Valuable Education (SAVE) plan is coming to an end soon, and the more than seven million student loan borrowers who have been stuck in a forbearance will soon need to pick a different repayment plan.But waiting too long could come with some serious risks.

Why the SAVE Plan is ending sooner than expected The SAVE plan — a Biden-era income-driven repayment (IDR) program that offered borrowers generous benefits, including lower monthly payments, an interest subsidy and eventual student loan forgiveness — has been blocked due to a legal challenge since the summer of 2024.The OBBBA will officially end SAVE by phasing out the program by 2028.However, the SAVE plan will end much sooner than that, after the Education Department entered into a settlement agreement with Missouri and other state challengers in December.  Once a federal court approves the settlement, which is expected to happen, everyone in the SAVE plan forbearance will likely be forced back into repayment.“On Dec.

9, 2025, the U.S.Department of Education (ED) announced a proposed settlement agreement with the state of Missouri that would end the Saving on a Valuable Education (SAVE) Plan,” says the department on its website.“As part of the proposed settlement agreement, which is pending court approval, ED would not enroll any new borrowers in the SAVE Plan, deny any pending SAVE applications, and move all SAVE borrowers into available repayment plans.While the settlement agreement is still pending court approval, we encourage borrowers to use Loan Simulator to explore other available repayment plans.

Loan Simulator allows borrowers to estimate their monthly payments, determine their repayment plan eligibility, and choose the available repayment plan that best meets their needs and goals.” While the Education Department has not released any details on what the process for transitioning student loan borrowers from SAVE to other repayment plans will look like, borrower advocacy groups are warning that things may move very quickly once the court approves the settlement and the SAVE plan officially ends.That could happen at any time.“Under the settlement, the Department agrees to work to move all of the borrowers currently in the SAVE plan out and into a different repayment plan,” explained the National Consumer Law Center (NCLC) in a blog post in December.“The settlement does not say how soon borrowers will have to move out of the SAVE plan.

In its press release, the Department of Education said that borrowers in SAVE will have ‘a limited time’ to select a new repayment plan.  The Department has not said what repayment plan the Department will move borrowers into if they do not select a new repayment plan.” Why waiting could backfire Student loan borrowers in the SAVE plan forbearance should start exploring their options now.Currently, borrowers can apply for the Income-Contingent Repayment (ICR), Income-Based Repayment (IBR), or Pay As You Earn (PAYE) plan, depending on eligibility, but most borrowers will have higher payments under all of the other IDR plans, which is something to be aware of.  While borrowers don’t have to switch their plan immediately, waiting until the Education Department forces them to do it could be risky, as more than seven million borrowers simultaneously applying to change repayment plans could strain the department’s processing capabilities, potentially leading to backlogs, delays, and errors.Consolidate your student loans before July 1, 2026 The OBBBA creates a major student loan “cliff” on July 1, 2026.Federal student loans and federal Direct consolidation loans issued prior to that date will have different repayment plan options than those issued on or after that date.  This cutoff is particularly important for Parent PLUS borrowers.

Under the OBBBA, many Parent PLUS borrowers will be completely cut off from any income-driven repayment option, and ultimately student loan forgiveness as well (including Public Service Loan Forgiveness) unless they take certain steps prior to the cutoff.  The steps Parent PLUS borrowers must take Specifically, Parent PLUS borrowers must consolidate their loans through the federal Direct Consolidation Loan program before July 1, 2026, and enroll in the ICR plan before July 1, 2028.These borrowers will then be able to switch to the IBR plan, given that the OBBBA sunsets this ICR plan by July 2028 but preserves IBR.“The Big Bill significantly changes Parent PLUS borrowers’ repayment options,” says NCLC on its website.“Only Parent PLUS borrowers that consolidate their loans before July 1, 2026 and are enrolled in any IDR plan between now and July 1, 2028 will be eligible for an income-driven repayment plan after the SAVE, ICR, and PAYE plans are eliminated on or before July 1, 2028.

Those borrowers will be eligible for the Income-Based Repayment (IBR) plan.They will not be eligible for RAP.Existing Parent PLUS borrowers who do not jump through these hoops in time will be locked out of income-driven repayment options, which could make it very difficult to manage their loans if they cannot afford fixed payments.” The Education Department recommends that borrowers who need to consolidate their student loans to preserve their repayment options as programs change under the OBBBA should do so at least three months prior to the July 1, 2026 cutoff, since it can take anywhere from 30 to 90 days (and sometimes longer) for Direct Consolidation Loans to be disbursed and completed after the initial submission of the application.“Borrowers who must consolidate in order to access the IBR, ICR, and PAYE Plans must have their consolidation loan disbursed no later than June 30, 2026, in order to access IBR, ICR, and PAYE,” says the Education Department on its website.

“Borrowers who must consolidate their Parent PLUS loans in order to access IBR and ICR don’t need to be enrolled in ICR before June 30, 2026, in order to eventually access IBR.Borrowers who receive disbursements on new loans or on a new consolidation loan on or after July 1, 2026, won’t have access to IBR, ICR, or PAYE even if they were previously enrolled in any of those plans.We strongly encourage borrowers who must consolidate their loans in order to access the IBR, ICR, and PAYE Plans to apply for their consolidation loan at least three months before July 1, 2026, to ensure that their consolidation loan is disbursed before July 1, 2026.” Get your student loans out of default Federal student loan delinquencies and defaults are skyrocketing as millions of borrowers struggle to return to repayment after the expiration of Covid-era flexibilities, and the seemingly endless changes to student loan programs create an ever-shifting landscape that can be challenging to navigate.Millions of borrowers are currently in late-stage delinquency or in default on their federal student loans (borrowers default on federal student loans after being more than 270 days past due).

In January, the Education Department abruptly and unexpectedly announced a pause on so-called “forced” federal student loan collections — administrative powers that give the government powerful tools to take a borrower’s income or benefits involuntarily without a court order and apply it to their defaulted federal student loan balance.These tools include administrative wage garnishment, as well as the Treasury Offset Program, which authorizes the seizure of federal benefits and tax refunds.  “The U.S.Department of Education (the Department) today announced that it will delay the implementation of involuntary collections on federal student loans, including Administrative Wage Garnishment (AWG) and the Treasury Offset Program (TOP),” said the department in January.“The temporary delay will enable the Department to implement major student loan repayment reforms under the Working Families Tax Cuts Act (the Act) to give borrowers more options to repay their loans.” Why you shouldn’t wait for collections to resume It is unclear how long the delay will last or when student loan collections efforts will resume.

But borrower advocacy groups urged borrowers in default on their federal student loans to take steps now to get back into good standing, before that happens.  “The Department did not specify when it will resume default collections or how long the delay will last,” said NCLC on its website following the announcement.“For now, borrowers can use the time offered by the delay in collections to take stock of their student loan situation.Borrowers in default can take action to get out of default before collection resumes.And borrowers who have fallen behind on their loans but are not yet in default can take actions to prevent default.”