The year 2024 has been very rough for people with college loans.
A huge amount of debt was forgiven for millions of people, including government workers, people who had been paying back their loans for decades, and people who were scammed by their schools. Other borrowers saw the Biden administration propose broad loan forgiveness plans, which were then criticized by opponents and taken back. More than a million people are still in the dark because two federal courts stopped a new repayment plan that the Biden administration pushed as a way to help struggling borrowers.
And it looks like it will still be hard to manage college loans in 2025. Some of the things that started this year are still going on, and programs that were put in place during the pandemic to protect borrowers from the worst effects of not paying their student loans will end in 2025. It’s also possible that the Trump administration will handle student loans differently than the Biden administration, but it’s hard to say for sure what might change.
Here are some of the biggest changes that experts think will happen in the next year, along with tips for borrowers on how to handle them.
- Payment plans based on income are changing
The Biden government started SAVE in 2023 as a new way to help people pay back their loans. Its goal was to lower people’s monthly payments and shorten the time it took for small loans to be forgiven. Even though there were reports of long wait times when calling and problems getting accurate information from servicers about monthly payments, by the summer of 2024, about 8 million users had signed up for the new program.
But two federal courts blocked SAVE after several states run by Republicans sued to stop the plan. This left the borrowers in the dark. It’s not clear what will happen next for them, said Betsy Mayotte, head of the Institute of Student Loan Advisors, a group that helps people manage their loans for free.
Trump’s new government hasn’t said much about how it plans to handle student loans, but Republican leaders at the state and federal levels have said bad things about SAVE. That means it’s possible that the new government won’t support the repayment plan in court anymore.
Mayotte said that if that happens, it will be a first for both SAVE users and the student loan system as a whole. She said that the lawsuit-related payment freeze for SAVE loans could be kept in place so that they have time to agree to a new plan. That being said, the future for these loans is still unclear.
That’s why Mayotte is telling people who are in SAVE to look into other ways to pay back their debt.
“I always tell people to learn about their choices,” she said.
Income-driven repayment plans are a set of options from the government that let people pay back their debt as a proportion of their income. After a few years of payments, the rest of the debt is forgiven. Pay as You Earn and Income Contingent Repayment are two of these plans that the Department of Education recently brought back after ending them when SAVE came out.
This is good news for SAVE plan users who want to keep working toward cancellation and get their loans forgiven. PAYE and ICR will let them do that. The months that borrowers spent in the SAVE pause because of litigation don’t count toward getting rid of their debt under the Public Service Loan Forgiveness plan or other cancellation schemes.
Borrowers can pay off their debt in 10 years with a normal plan or longer with a program called graduated repayment. Another option is to base their payments on their income. Students can go to StudentAid.gov to learn more about their choices.
For people who aren’t trying to get their loans forgiven, Mayotte suggests that they look over their student loan plan every year when they do their taxes and have all of their financial information handy. Even though 2025 is a complicated year, that advice hasn’t changed. “Paying the least amount over time is the name of the game” for people who don’t want to cancel their loans, she said.
People should look over their budget and student loan debt as part of this activity.
She said, “They might find that they can afford an extra $50 or $100 a month, or maybe their finances have changed and it’s time to look at a lower repayment.”
- Tax returns, wages, and Social Security checks could be taken away from people who borrow money.
Borrowers who don’t pay back their federal student loans face harsh penalties, such as having their tax refunds, wages, or Social Security checks seized to pay the debt.
As part of programs meant to get struggling student loan borrowers back on track during the pandemic, that collection activity has been put on hold for more than four years. But Tia Caldwell, senior policy analyst at the think tank New America, said that it’s likely that collection on defaulted loans will pick up again sometime in the new year.
“There are a lot of families and borrowers who will lose some or all of their wages, Social Security, and even their tax refunds all of a sudden,” she said. “It’s going to be hard.”
Caldwell is worried that some borrowers might be shocked when they lose their wages, Social Security benefits, or tax returns.
Some borrowers might not know they’re in default because they haven’t been collected on in four and a half years. Caldwell said, “You might forget or think that the statute of limitations has taken care of your debt.”
That could mean that these borrowers lose wages and other important resources, which would be “a huge shock to the economy and to their financial stability,” said Persis Yu, deputy executive director of the Student Borrower Protection Center, an advocacy group.
People who haven’t paid their government student loans in months can check the status of their loans at StudentAid.gov. That’s where they can see how much they owe and get in touch with loan servicers for help staying on top of their payments.
If a borrower is already behind on their payments, they should talk to their loan holders about consolidation or rehabilitation. These two choices can fix the default, give the borrower access to affordable payment plans, and stop collection efforts.
- There could be a wave of new defaults
Experts are saying that there could be a wave of new defaults as early as next year. This is on top of the millions of borrowers who are already behind on their payments and could be collected on. This is because the student loan system has changed so much in the last few years that borrowers may not know what their choices are. Also, the consequences for not paying back the debt have been put on hold.
Yu also said that the back and forth over SAVE is likely to make it harder for people who are having trouble making their payments to find options that are reasonable. Millions of people who took out student loans during the pandemic haven’t paid their bills since the grace period ended in 2023.
“What are those people going to do?” Yu said. “They can’t use the SAVE plan, which was meant to help them get back on track with their payments.” Are we going to see almost twice as many defaults next year because people can’t find a cheap way to pay their debts? A lot of borrowers will fall through the cracks.
Mayotte told people who are having trouble making their payments that they do have choices, and most of the time, those choices are cheaper than going into default and having their wages or government funds taken away.
She said, “I’ve almost never met a borrower with whom we couldn’t find something that would work for them and keep them from defaulting.” If a borrower is having trouble making their payments, they should call their servicers and ask about more affordable choices, such as income-driven repayment.
And Mayotte said, “There is never a time when it makes more sense to let yourself default.”
- Lower interest rates might make it tempting to refinance, but experts warn you not to do it.
The Federal Reserve began lowering interest rates in the fall of 2024. This was done to make interest rates lower generally, including for private student loans and other types of consumer debt.
That might make you want to refinance your federal student debts. People who have a government student loan can change it into a private loan in this deal to get a lower rate. The interest rate on a federal student loan stays the same for the life of the loan. This means that a borrower who took out the loan when rates were higher could refinance in the private market when rates are lower to lower their monthly payments. The federal government gives money to all students, even those with bad credit. This means that a private lender might offer a lower rate to a borrower with good credit and good chances of making more money.
But Mayotte has a warning for people with government student loans who are thinking about taking advantage of these kinds of deals. There are some protections that come with federal student loans that aren’t always available on the private market. For example, you can repay your debt as a portion of your income, and you may be able to get your loan forgiven if you become permanently disabled.
She also said that people who refinance their federal student loans “lose all the safety nets and options that are unique to federal student loans.”
Mayotte said that borrowers with steady jobs who make a lot of money have told her not to follow this advice. She does say that it’s hard to know what will happen, though. For example, a renter could decide they want to be a stay-at-home parent, or something could happen that makes it hard for them to pay back their loan.
“Life can hit you with a left hook, and I’ve seen it happen a lot of times,” Mayotte said. “That’s why I’m so sure that people with federal student loans shouldn’t refinance.”
The Consumer Financial Protection Bureau also said this month in a report that people who are borrowing money should be careful when looking into their refinancing choices. The CFPB said that private lenders who offered to refinance federal student loans lied to borrowers by saying that they “may” lose their federal benefits if they did so, which is 100% true. The CFPB also said that when lenders were asked about debt forgiveness, some of them used rehearsed answers that didn’t say anything about losing that option after refinancing.
The head of a trade group called the Student Loan Servicing Alliance, Scott Buchanan, disagreed with the CFPB’s report. He said that the biggest problem for people who have federal student loans is that the government keeps changing what it says about benefits for these loans, which makes things confusing for people who have them.
“Lenders do tell borrowers that they might lose benefits, and people should learn about those before they decide to refinance,” he said.
- The Trump government is likely to handle student loans in a different way.
President-elect Donald Trump hasn’t said much about how his administration will handle student loans, but based on what he did in his first term and what his political friends have said, it’s likely that things will change.
During Trump’s first term, Betsy DeVos, who was Secretary of Education, put off reviewing claims for forgiveness from students who had been scammed. She also tried to limit cancellations for people whose claims had already been granted. Also, Republican leaders have said they want to change the way income-based repayment works and cut back on or get rid of the Public Service Loan Forgiveness program.
Yu said it would be “very difficult” for the government to say that people who are still trying to get PSLF no longer have the right to it. She is more worried that the new government won’t make it a priority to make sure that servicers and others are held responsible for making sure that eligible borrowers can get help.
In the past, cases and government officials have said that servicers did not properly credit borrowers for the monthly payments they made, which would have gotten them closer to being able to forgive their debt.
Still, Mayotte tells people who are borrowing money to stay cool. She said that the new government might not want to use the same strategy again because of the lawsuits that came up when they tried to delay cancellations in the past. Changes to payback plans or programs for loan forgiveness would also probably only affect people who have loans in the future, not people who already have loans.
Other people who work to help people with student loans are telling the Biden administration to hurry up and cancel the debts of people who have been told by the government that their debts will be forgiven and of older people who have student debt that they’ll probably never pay back.
Also, advocacy groups have said they will fight back against any attempts by the new government to limit the benefits borrowers get. They plan to do this by suing and working with state attorneys general, among other things.
Yu said, “Borrowers do have rights.” “Avocates are getting ready to fight for those rights.”
