Student Loan Forgiveness Updates: Common Questions Answered

The One Big Beautiful Bill Act brings new changes

If you've tried to follow student loan news lately, you probably need a spreadsheet and a strong cup of coffee. Policies keep changing, deadlines keep shifting and borrowers are left guessing what comes next. After years of pauses and policy reversals, plus adjustments under the One Big Beautiful Bill Act (OBBBA), it's no wonder borrowers are confused about what relief options still apply.

Behind the noise lies a staggering reality: As of August 2025, 42.5 million Americans owed a combined $1.8 trillion in student loan debt—a record high that shows just how much is at stake.

This FAQ cuts through the chaos, answering the most common questions and outlining what you can realistically do right now to manage, reduce or eliminate your debt.

1. What Are the Main Changes From the OBBBA?

The OBBBA makes changes to how federal student loans are repaid, forgiven and taxed. Below are three key updates borrowers need to know:

Phases out of SAVE and other income-driven repayment (IDR) plans by 2028

The OBBBA is phasing out most income-driven repayment (IDR) plans. That means the Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans will all end by July 1, 2028.

After that date, most borrowers will only be able to use one of these repayment options:

• Income-Based Repayment (IBR) plan
• Repayment Assistance Plan (RAP)
• The Standard, Graduated or Extended repayment plans

If you're currently enrolled in SAVE, here's what's happening:

• Many borrowers are under a court-ordered billing pause, so loan servicers aren't sending bills right now. That doesn't mean your loans are in official forbearance—it just means payments are temporarily on hold.
• The interest-free pause ended in August 2025, so interest is now building up again, even if you aren't required to make payments.

What to do:

• Stay in SAVE for now if it's still your cheapest option, but try to pay the interest each month to stop your balance from growing.
• Log in to StudentAid.gov and go to the “My Aid" tab to view your loan details, including how much interest you owe and who your servicer is.
• Make interest payments to your servicer, keeping screenshots of the payments for future proof.
• Before 2028, consider switching to the Income-Based Repayment (IBR) plan or exploring the new Repayment Assistance Plan (RAP) once it's available.
• You could also consider refinancing with a private lender, but that means giving up federal protections. This loan simulator can help you assess your options.

Introduces the Repayment Assistance Plan (RAP)

The OBBBA creates a new income-driven repayment plan called the Repayment Assistance Plan (RAP). This plan is very different from the older IDR plans and is scheduled to begin on July 1, 2026. Here's what's changing:

• Even the lowest-income borrowers must make a minimum payment of $10 per month, no matter their income or family size.
• Monthly payments will be based on your adjusted gross income (AGI) minus $50 for each dependent you claim.
• As with the SAVE plan, any unpaid interest will be waived, so your balance won't grow just because your payment doesn't cover the full interest.
• RAP also reduces your loan's principal by up to $50 per month if your payment doesn't already do so.
• RAP is more expensive than SAVE and will generally cost more than most existing IDR plans for low-income borrowers.
• Loan forgiveness under RAP comes after 30 years (360 qualifying payments)—longer than the 10 to 25 years offered by previous IDR plans.

What to do:

• Watch for official Department of Education updates as RAP is rolled out.
• Once details are finalized, compare your projected RAP payments with your current plan using the Loan Simulator at StudentAid.gov.
• If you have a low income, look closely at how much more RAP could cost compared to SAVE before making changes.

Reinstates federal taxes for student loan forgiveness

The American Rescue Plan Act of 2021 made student loan forgiveness tax-free at the federal level through December 31, 2025. The OBBBA did not extend that provision.

Starting January 1, 2026, any amount of student debt that's forgiven will once again count as taxable income. In short, if your loans are cancelled after that date, you'll likely owe federal taxes on the forgiven amount.

However, there was recent resolution of a lawsuit filed by the American Federation of Teachers against the federal government in March 2025, claiming that delays could stop borrowers from getting forgiveness before the tax-free deadline.

The October 2025 agreement means that borrowers in IDR plans who have made enough qualifying payments will be eligible for relief and will not be subject to those taxes, regardless of when the cancellation is processed.

Borrowers will start receiving letters informing them that payments they have made have been reinstated and updating them on the status of their forgiveness.

What to do:

• Keep an eye on your loan status and any forgiveness updates at StudentAid.gov.
• If your loan is not scheduled to be forgiven until 2026 or later, talk to a tax professional about the potential ramifications.
• Save copies of your forgiveness application and communication with your servicer in case processing delays affect your timing.

2. What Programs Are Available To Ease or Erase Student Debt?

While broad loan forgiveness plans have faced legal and political setbacks, several programs still exist to help borrowers manage or reduce their debt. Here are the main ones:

Income-Based Repayment (IBR) plan

The Income-Based Repayment (IBR) plan bases your monthly payment on your income, family size and state of residence. This link explains how discretionary income is calculated.

What to do:

• Compare repayment plans and apply at StudentAid.gov/IDR.
• Expect delays. As of September 2025, there were more than one million unprocessed applications awaiting decisions, and the October 2025 government shutdown furloughed about 87% of the Department of Education's workforce, slowing things further. Once the U.S. government reopens, there will be delays as the agency plays catch-up.

Public Service Loan Forgiveness (PSLF) program

The Public Service Loan Forgiveness (PSLF) program cancels the remaining balance on Direct Loans for eligible public service workers—like teachers, first responders, military service members and nonprofit employees—who make 120 qualifying monthly payments while working full time for a qualifying employer.

Because of rule changes and the COVID-19 pause, more months now count toward forgiveness than before. These changes have helped many borrowers reach the 120-payment mark faster, and in some cases, forgiveness is processed automatically once those payments are credited.

Right now, the Department of Education says PSLF is not changing, but a recent executive order is under review. Borrowers don't need to take any new action at this time.

What to do:

• Use the PSLF Help Tool at StudentAid.gov to confirm whether your employer qualifies and to generate your PSLF form.
• Check your loan type. Make sure it's a Direct Loan.
• Check to see the status of your loan application or how many qualifying payments you've made by clicking on this link.
• Keep an eye out for updates. Stay alert for updates from the office of Federal Student Aid if new rules or restrictions are announced.

Employer-sponsored benefits

According to a 2024 report, the number of employers offering student loan repayment assistance has more than tripled—rising from 4% in 2019 to 14% in 2024.

That's a significant shift. More companies are discovering that helping employees pay down student debt is both a retention tool and a morale booster.

What to do:

• Ask your HR department whether your employer offers any student loan repayment benefits.
• If not, suggest it as an employee benefit. Under the OBBBA, employers can make tax-free contributions toward your student loans, currently up to $5,250, with that limit adjusted for inflation after 2026.

3. How Do I Know How Much I Owe on My Student Loans?

With all the changes in loan programs and servicing over the past few years, it can be tricky to know exactly what you owe—or whether your loan is in forbearance, paused or even forgiven. But not knowing doesn't remove your responsibility, so it's worth confirming where things stand.

What to do:

• Check your status at StudentAid.gov. Log in with your Federal Student Aid ID, then go to the “My Aid" tab to view your loan details.
• Use StudentAid.gov's virtual assistant, Aidan. Click the owl icon to get help with resetting your password, logging in, identifying your loan servicer, checking your account balance and more.

4. What Happens If My Loans Are in Default?

If your federal student loan goes into default, it usually means you've gone more than 270 days without making a required payment. However, the point at which a loan is considered in default varies depending on the type of loan. For some older Perkins Loans, default can happen even sooner.

Once that happens, the full balance becomes due right away. Your credit score may drop, your wages can be garnished and the government can take your tax refunds or federal benefits. You'll also lose access to flexible repayment plans until the default is resolved.

What to do:

• Visit the Debt Resolution site for an overview of your account.
• Use the Loan Simulator at StudentAid.gov to compare options for moving into an IDR plan if needed.
• Explore loan consolidation, which might simplify multiple loans into one and potentially lower your monthly payment by extending the repayment period.
• Read the fine print before making changes—especially if you're working toward forgiveness, as a lower payment today could mean paying more over time due to accruing interest.

5. How Are Changes at the Department of Education Affecting My Loans?

The Department of Education, which manages the federal student loan system, has faced major staffing reductions and operational slowdowns under the Trump administration, made worse by the October 2025 government shutdown. These disruptions have delayed loan processing, forgiveness applications and customer service responses.

Even if federal oversight continues to change, your student loans remain debts owed to the U.S. government. If management ever shifts to another agency, your loan terms and repayment obligations would carry over unchanged.

What to do:

• Continue to make payments as scheduled, if required.
• If you've fallen behind, make a plan to attack your student loan debt. The longer you delay, the more damage it can do to your credit rating and long-term financial goals.
• Stay informed. Log in to StudentAid.gov regularly to check your loan status.
• Maintain personal records. Take screenshots of payment history and save confirmation emails.
• Check your credit report to ensure there are no errors related to your loans, especially during times of system or policy change.

6. If My Loan Is in Forbearance, What Should I Do With the Funds I Would Otherwise Be Using To Make Payments?

If your student loans are in forbearance—whether from financial hardship, an administrative pause or personal choice—it's tempting to see that extra cash as spending money. But instead of treating it like a bonus, consider setting aside the same amount each month as if your payments were still active. This approach helps you stay financially disciplined and gives you a buffer when payments restart.

Smart moves for that “extra" money:

• Save it. Park it in a high yield savings account where it earns interest but stays accessible.
• Build or boost your emergency fund. Aim to save three to six months of expenses.
• Pay off high-interest debt, which often costs more than student loan interest.

7. If I Qualify for One of These Debt-Relief Options, What Should I Do With the Funds I Had Set Aside To Pay My Loans?

If your student loans have been reduced or forgiven—congratulations! You've just gained a little breathing room in your budget. This is a great opportunity to review your financial goals and put that freed-up cash to work.

Here are smart ways to use that extra income:

• Start (or restart) a savings habit. Consider putting the same amount you were paying toward loans into a high yield savings account to build an emergency fund or cover short-term goals. And earn interest!
• Lock in better returns. If you don't need the money right away, consider a certificate of deposit (CD), which often pays higher interest than a regular savings account. Just remember, the funds are tied up for a set term.
• Invest for the long term. Opening or contributing to a traditional or Roth IRA can help grow your retirement savings over time, thanks to the magic of compound interest.
• Refocus your financial goals. Any money milestone—especially one like student debt relief that allows you to “reset"—is an opportunity to assess your future goals and make moves to improve your overall financial well-being.

Staying Grounded as the Student Loan Landscape Shifts

The student loan landscape is still changing, with more changes on the horizon. The best course of action is to stay in the loop—check your loan status, confirm whether you're in repayment or forbearance and explore whether a new repayment plan better fits your goals. And keep making your payments as required!

If the forgiveness you were counting on hasn't materialized, you're not alone—and yes, that can be stressful. But this is a chance to revisit your budget, explore ways to free up cash flow and create a realistic plan for handling your payments while still building your savings. Student debt may still be part of your financial picture, but with the right tools and some proactive steps, it doesn't have to control the whole frame.

READ MORE: 3 Strategies for Managing Education Debt