Student-loan borrowers should be prepared for major changes coming in 2026

By Jillian Berman

Repayment plans and loan limits are set to change, while the Education Department remains in flux. 'It will be a really significant year on student-loan policy,' one expert notes.

The financial picture for many student-loan borrowers will change next year.

Student-loan borrowers have had a tumultuous few years, and that's likely to continue in 2026.

Repayment plans for all borrowers and borrowing limits for some programs are set to change next year. Meanwhile, millions of borrowers are behind on their payments and risk facing some of the harshest consequences of the student-loan program if they don't start paying their loans. And behind the scenes, changes at the U.S. Education Department could make many of these transitions more challenging.

As Clare McCann, managing director of policy and operations at the Postsecondary Education & Economics Research Center put it, "it will be a really significant year on student-loan policy."

Here's a closer look at some of the changes.

Repayment plans

The Education Department announced in December that it planned to scrap the SAVE plan, a Biden-era repayment program that has been mired in litigation for years. The announcement came as part of a settlement with the state of Missouri, which had sued over the plan. If the court approves the settlement, the roughly 7 million borrowers enrolled in SAVE will be forced to exit the plan in the coming months.

"Anybody who is on the SAVE forbearance should be prepared and start researching the best payment plan they should switch to," said Betsy Mayotte, the president of the Institute of Student Loan Advisors. She suggests borrowers go to StudentAid.gov and use the loan simulator tool to get a sense of their options. That's the best approach even as the tool is experiencing some glitches right now.

Even before the Education Department's announcement, the SAVE plan was already set to go away in 2028 thanks to this year's One Big Beautiful Bill Act. Other repayment programs that allow borrowers to repay their debt as a percentage of their income and have the remainder canceled after decades of payment - including Pay as You Earn, Revised Pay as You Earn, and Income-Contingent Repayment - will also disappear in 2028 thanks to the legislation.

Going forward, borrowers will have three main options. The first is a mortgage-style payment plan where they pay the debt off in 10 to 25 years. The second is Income-Based Repayment, an income-tied payment plan that Congress created nearly 20 years ago.

The third option is called the Repayment Assistance Plan, or RAP, and congressional Republican lawmakers developed it as part of the new legislation. Under this plan, borrowers pay back their loans as a percentage of their income, though there are key changes from previous income-driven plans that the legislation scrapped

Borrowers using RAP have a minimum monthly payment of $10, whereas some borrowers paid $0 under previous plans. In addition, borrowers using RAP have to make payments for 30 years in order to have their debt canceled. Under previous plans, the maximum repayment timeline was 25 years. Finally, borrowers whose income-tied payments are so low that they don't touch the principal won't see their balances go up, and they'll receive up to $50 a month from the government to put toward the principal.

"We'll have new repayment options coming online. A lot of existing borrowers will need to find their way to [different] repayment plans, [and] new borrowers are going to have a very different set of options," McCann said of the changes coming next year. "It looks pretty different from some of the other income-driven plans we've had in the past."

For many borrowers, particularly those on the SAVE plan, it may be difficult to adjust to the new financial reality, Mayotte said.

"There's a lot of people who made other financial decisions based on the budget they had made around what their SAVE payment was," she said. For example, they may have budgeted how much they could spend on a mortgage or child care based on a student-loan payment that's likely to tick upward in the coming months.

Default cliff looming

There are several indications that more borrowers than typical are severely behind on their student-loan payments - and in 2026, these borrowers could face consequences that have major implications for their economic lives.

The Education Department announced that it would start garnishing the wages of borrowers in default on their loans early next year. About 1,000 borrowers will receive notices warning of these consequences on the week of Jan. 7, and the agency will continue to increase the number of notices sent on a month-to-month basis, officials said.

Sarah Sattelmeyer, a project director in the higher-education initiative at New America, a think tank, said she's specifically focussed on three main groups of borrowers who are vulnerable to the consequences of default next year.

The first group are borrowers who soon will be exiting the SAVE program. These borrowers may not have made payments for an extended period of time, according to Sattelmeyer. That means they may not have engaged with the student-loan system recently and could struggle to find an affordable repayment plan and get into the habit of making payments. Sattelmeyer said it will be crucial for the government and its contractors to ensure these borrowers have the information and resources they need to smoothly transition to new repayment plans and avoid falling behind on their loans.

Sattelmeyer's second area of concern includes the roughly 5 million borrowers who defaulted on their student loans before the pandemic and remain stuck in that status. Some may be already experiencing the consequences of default or will face them soon.

And third, there are millions more borrowers who are severely behind on their loans and could possibly default in the coming months.

'We'll have new repayment options coming online. A lot of existing borrowers will need to find their way to [different] repayment plans, [and] new borrowers are going to have a very different set of options'Clare McCann, managing director of policy and operations, Postsecondary Education & Economics Research Center

Given all of the changes coming to student-loan repayment at once, Sattelmeyer said she's worried that borrowers may fall through the cracks and face challenges staying current on their loans. That's why it's important that the government and its servicers have robust and clear communication with borrowers, particularly with respect to exiting default, she said.

Borrowers who are in default can either rehabilitate their loan - which requires them to make nine on-time monthly payments in 10 months - or consolidate their loan to become current again. Once borrowers become current, they can select a student-loan repayment plan to continue making monthly payments.

So far, many borrowers who are in default haven't experienced some of the most severe consequences yet, despite warnings from the Education Department earlier this year that it would begin collections on defaulted debt. The agency has paused taking Social Security benefits to repay student loans, although that could theoretically restart at any time. In addition, advocates and attorneys that work with borrowers say they have yet to see a large influx of borrowers subject to wage garnishment. But that will likely change starting in 2026, given the Education Department's announcement that it's restarting wage garnishment.

In addition, it's likely that millions of borrowers who have fallen behind on their debt will face another penalty of a student-loan default in 2026: having their tax refund taken.

"That will come as a surprise to a lot of people who are not really prepared for the consequences of default to be turned back on," said McCann.

For parents, new loan limits and more limited repayment options

The One Big Beautiful Bill Act made major changes to Parent PLUS, the federal program parents can use to borrow loans to pay for their kids' schooling.

Previously, parents could borrow up to the cost of attendance. That led to concerns across the political spectrum about parents taking on unsustainable debt, as well as colleges not feeling any pressure to keep their prices low.

The new law saw Republicans offer a solution to these challenges - but some worry that even with the changes, families will wind up with debt they can't handle, struggle to access affordable repayment plans and get locked out of higher education altogether.

Starting in July 2026, parents will be able to borrow a maximum of $20,000 per student per year, and a lifetime maximum of $65,000 per student. If parents have children currently enrolled in school, they can maintain eligibility to borrow up to their kids' cost of attendance for the remainder of the student's program, as long as they don't consolidate their loans after July 2026.

The changes in the legislation also mean that parents who are in repayment on their student loans will lose access to affordable repayment plans unless they take certain steps. Borrowers who want to be able to use a plan that ties payments to income and offers access to cancellation after a certain number of years need to consolidate their loans.

To maintain eligibility for these plans, the consolidation has to be completed by July 1, 2026, and borrowers have to make at least one payment on an income-driven plan before July 2028.

Mayotte said that borrowers who want to take advantage of this option should apply to consolidate their loans no later than February to be sure the consolidation is processed in time. They can apply to consolidate on the government's student-loan website.

If parents take on any new loans or consolidate after July 1, 2026, they'll lose access to affordable repayment plans, Mayotte noted.

Changes to graduate borrowing

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12-30-25 0900ET