Trump and Student Loans: What’s Happening With Wage Garnishment, Repayment Plans, SAVE and More
Federal student loan policy is evolving fast. For borrowers, both current and future, here’s what you need to know.
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Updated · 7 min read
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Let's break down the latest news that affects student loan borrowers.
Wondering what's changing for borrowers this year? Our 2026 student loan guide has you covered.
Wage garnishment delayed
In early January, the Education Department (ED) began notifying student loan borrowers in default that involuntary wage garnishment would resume. On Jan. 16, the ED announced all involuntary collections on federal student loans, including garnishment, would be temporarily delayed. This delay includes the Treasury Offset program (TOP), which intercepts federal payments like tax refunds and Social Security. The ED did not provide a date for collections to resume.
While this delay does buy some time for student loan borrowers who are in default, it's important to realize that the possibility of having wages garnished or tax refunds withheld isn't going away. Borrowers can use this time to explore ways to get back on track.
- Defaulted borrowers who have not consolidated their federal student loans may be eligible for loan consolidation, which combines multiple loans into a single new loan, essentially giving the borrower a clean slate.
- Loan rehabilitation may be another option. With loan rehabilitation, the borrower works with their servicer or the Default Resolution Group to come up with a temporary payment plan. After nine on-time payments, loans are returned to good standing, removing the default from your credit report. ED's announcement notes that borrowers who have already rehabilitated their loans will now get a second chance — previously, borrowers only had one shot at rehabilitation. This provision of the One Big Beautiful Bill Act (OBBBA) had been set to go into effect in July 2027, but based on the ED's language it may be sooner.
A federal student loan is considered in default after 270 days of missed payments, and at that time the ED or agencies acting on its behalf can order an employer to withhold up to 15% of a borrower’s after-tax wages to put toward the debt. If you aren't sure of your loans' status, log on to your account at studentaid.gov.
🤓 Nerdy Tip
Scammers were expected to take advantage of student loan wage garnishment notices being sent out. As always, be wary of calls, texts or emails from anyone claiming they can halt garnishment for a fee or asking for your FSA ID. If you aren’t sure whether communication is real or fake — even an initial notice — call the Federal Student Aid Information Center at 1-800-433-3243. SAVE plan is dead
In early December 2025, the ED announced a proposed settlement to resolve a long-running lawsuit against the Saving On a Valuable Education (SAVE) income-driven repayment (IDR) plan.
Though the settlement is pending court approval, that's pretty much a formality. The announcement effectively confirms that SAVE is ending. The ED has stated borrowers will have a “limited time” to switch to a new repayment plan, but it hasn’t announced what the exact timeline will be.
The SAVE plan launched in 2023 under the Biden administration and enrolled 8 million borrowers at its peak. The plan's low monthly payment amounts, interest subsidies and relatively short forgiveness timeline made it a popular option. But a lawsuit filed by Republican-led states in April 2024 challenged the plan's legality. That summer, a court injunction blocked the repayment plan from operating during the litigation, and SAVE borrowers were placed in an involuntary forbearance.
Borrowers were encouraged to move off of the SAVE plan during that time, as the months in forbearance did not count toward income-driven repayment forgiveness or Public Service Loan Forgiveness. In August of 2025, SAVE borrowers got even more incentive to swap when the ED restarted interest accrual.
Most borrowers who are still on the SAVE plan don't need to act immediately, but do need to realize that SAVE is not coming back. When the ED issues guidance it will likely be, “You have until this date to switch to another plan. If you don't switch on your own, ED will choose for you.” So, now would be a good time to start deciding on a plan and budgeting, as your new plan may have a higher monthly payment.
Income-driven repayment options are shifting
SAVE wasn't going to last anyway, as all current income-driven repayment plans, except Income-Based Repayment (IBR), will be sunset by July 1, 2028 as part of President Donald Trump’s One Big Beautiful Bill Act (OBBBA).
Here are the IDR plans available for the time being and in the future:
- The existing IBR plan will remain an option for current borrowers, but only for loans disbursed before July 1, 2026. It won’t be available for new loans after that time. The IBR application was recently updated, so applicants no longer have to show a “partial financial hardship” to apply, making it more accessible to borrowers.
- For student loans taken out after July 1, 2026, the new Repayment Assistance Plan (RAP) and a simplified standard plan will be the only repayment options available. RAP will be the only income-based plan and will require 30 years' worth of payments before loan forgiveness.
- Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) are still available to current borrowers with loans taken out before July 1, 2026, but those plans will be phased out by July 1, 2028.
The ED recommends using its Student Loan Simulator to compare what payments would be like under different plans.
IMPORTANT note about SAVE and loan forgiveness
Borrowers who qualify for forgiveness while still enrolled in SAVE must apply to switch to another income-driven repayment plan before their loans can be discharged. But current processing delays mean borrowers could be stuck in SAVE even after reaching forgiveness eligibility. Forgiveness will still be applied after the plan change is processed, but borrowers should keep track of qualifying payments and continue making required payments (or ask about forbearance) until the loan balance is officially discharged.
Nerdy Perspective
My husband has student loan debt from law school and undergrad. We’ve been in the SAVE plan since it first rolled out. As of Dec. 17, we haven’t enrolled in a new payment plan, but we looked at our options and are satisfied with a payment plan through Nelnet (the loan servicer). We are making monthly interest payments until we hear the final options for SAVE borrowers. My husband also works for the city and would qualify for PSLF in about nine years (assuming nothing changes there), so we’re hoping to utilize that.
Student Loans Editor
Delays for IDR and PSLF Buyback applications
Student loan borrowers have faced roadblocks in the processing of their applications for an income-driven repayment plan or PSLF Buyback. The PSLF Buyback program enables borrowers to earn forgiveness credits for months they didn’t pay, for example when their loan was in forbearance. At the end of December, more than 800,000 federal student loan borrowers remained in a backlog of applications for affordable repayment plans or debt forgiveness.
On January 14, a status report was released detailing processing numbers for IDR and PSLF buyback applications. The report was required under a court order tied to a lawsuit filed by the American Federation of Teachers (AFT). Here’s a breakdown for the number of applications received, decided, pending and discharged between Dec. 1-31.
IDR applications
- Received: 258,465.
- Decided (approved or denied): 277,131.
- Discharged: 3,400.
- Pending (as of Dec. 31): 734,221.
PSLF Buyback applications:
- Received: 5,090.
- Decided (approved or denied): 1,930.
- Discharged: 9,400.
- Pending (as of Dec. 31): 83,370.
Although the ED agreed in October to resume forgiveness processing for borrowers on ICR, PAYE, SAVE and IBR plans, it is currently only processing forgiveness for IBR borrowers. That means many borrowers who are otherwise eligible for forgiveness are still waiting.
What does this mean?
The data is bleak for current borrowers looking to change IDR plans or get forgiveness through PSLF. The current state of the ED certainly isn't helping processing times, which already lagged.
It will likely get worse before it gets better. ED announced the end of the SAVE plan on Dec. 9, following a proposed settlement in the ongoing SAVE lawsuit. (More on that below.) That means borrowers currently enrolled in SAVE will need to change to a new payment plan soon. The speed at which the ED is processing IDR applications is already worrisome and may result in borrowers paying more than they can afford until they can get onto new plans.
On top of that, PSLF Buyback applicants waiting for word on their loan discharges are unlikely to receive an update any time soon. The department processed under 3,000 applications in November and still has more than 80,000 to process — and that's not including any new applications submitted this month.
What's the outlook for application processing delays?
While it's been reported that delays are largely resolved, we don't have official information from the ED confirming the current state of applications.
The state of the ED right now isn’t likely to help with any processing backlogs that do remain. And, the end of the SAVE plan may worsen the situation, as millions of borrowers are forced to switch repayment plans, resulting in a surge of applications.
What can borrowers do about IDR and PSLF delays?
Unfortunately, there isn’t anything borrowers can do to make their applications move faster. While delays are frustrating, they won’t erase eligibility for a new IDR or loan forgiveness. As long as a borrower has taken the required steps and qualifies for forgiveness, the ED is expected to apply that relief when the application is finally processed.
Here’s what you should do while waiting
- Make sure you’ve submitted required applications as soon as you're eligible. Forgiveness can’t be processed without an application on file, even if approval takes time.
- Continue making payments until your loan’s balance is discharged to avoid default. The AFT lawsuit affirmed that the ED must refund any payments made by borrowers after they had already reached forgiveness eligibility.
- Ask about forbearance if payments aren’t affordable. This can help prevent missed payments while waiting, even if interest may still accrue.
- Keep records. Save confirmation emails, copies of applications and your payment history, in case any issues need to be resolved later. An IDR loan forgiveness tracker previously available on studentaid.gov has been removed and isn’t expected to return.
FAFSA open for the 2026-2027 academic year
The FAFSA for the 2026-2027 academic year is available at studentaid.gov. Students and their parents must fill out this form to be considered for federal, state and school-based aid, as well as federal student loans.
How do I get started?
Before getting started, gather parents’ and students’ Social Security numbers, 2024 tax returns and bank statements, among other documents. (See this FAFSA checklist.)
Set aside about 30 minutes to complete the form at studentaid.gov. A new development for this year’s form: You can invite contributors with their email address, rather than having them create their own FSA ID.
Remember that you must fill out the FAFSA every year to qualify for aid and loans.
What’s my deadline?
For the 2026-2027 school year, the federal deadline is June 30, 2027. But — and this is significant — submit it as soon as you can. Individual states and schools may set their own deadlines earlier.
Also, some aid is given on a first-come first-serve basis, so applying early gives you the best chance of claiming that free money. See more about FAFSA deadlines.
Note that there’s still time to submit the FAFSA for the current 2025-2026 school year. You have until June 30, 2026.
Other ways the One Big, Beautiful Bill Act will impact borrowers
On July 4, 2025, the OBBBA was signed into law, and it will affect current and future student loan borrowers in many ways. You can find in-depth OBBBA info as it pertains to student loans here, and here are some key highlights.
- Forgiveness taxable again: The OBBBA did not extend temporary tax relief for student loan amounts that are forgiven under certain IDR plans. Students who receive student loan forgiveness on or after January 1, 2026, may be required to report the cancelled debt as taxable income on their federal (and possibly state) tax return, resulting in a student loan forgiveness tax bomb. This change does not apply to PSLF forgiveness. Also, it will not apply to borrowers who were eligible for forgiveness in 2025 but did not receive it until 2026 due to processing delays.
- Grad PLUS loans: PLUS loans for graduate and professional students will no longer be available for new borrowers after July 1, 2026. Students with existing Grad PLUS loans will be able to continue borrowing under their current terms for a period of time. New grad and professional students will be subject to federal loans with lower borrowing caps.
- Parent PLUS loans: Parent PLUS loans aren’t being eliminated, but they will have significant reductions in borrowing limits and won’t be eligible for income-driven repayment plans. To remain eligible for IDR and loan forgiveness, current Parent PLUS borrowers must consolidate their student loans before July 1, 2026 and enroll in a repayment plan. The ED’s federal student aid office recommends applying for the consolidation loan before April 1, 2026, to ensure it is disbursed by July 1.
- Limits to forbearance and deferment: Borrowers taking out new federal student loans after July 1, 2027 will face stricter guidelines for forbearance and deferment. Borrowers will no longer be able to qualify for a loan deferment because of unemployment or economic hardship.
Do I need to act now?
Most upcoming student loan changes won’t go into effect until sometime between July 1, 2026 and July 1, 2028. But some federal student loan borrowers should take steps now to protect their options or avoid problems later.
- If you’re a Parent PLUS borrower and haven’t consolidated your loans, submit an application to do so ASAP to maintain access to IDR plans and forgiveness.
- If you’re still on the SAVE plan, start comparing your replacement payment options. While immediate action isn’t required, you will eventually need to switch. Having a plan in mind can help you act quickly when the ED sets a deadline.
- If you’re pursuing IDR forgiveness or PSLF, submit your application as soon as you’re eligible. Applying promptly after you qualify ensures your forgiveness can be applied once any backlog clears.
- If your federal student loans are in default, take steps to avoid wage garnishment. You may be able to prevent it by contacting your loan servicer to explore options like student loan rehabilitation or consolidation.
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