Introduction

As 2025 winds down, federal student loan borrowers are once again facing a wave of major policy shifts. In just the past few weeks, the Department of Education has rolled out updates that will reshape repayment, forgiveness, and even default consequences going into 2026.

Some repayment plans are expanding, others are being phased out completely, and new systems are being built behind the scenes. Meanwhile, borrowers in default may soon see a return of aggressive collection tactics that haven’t been used in over five years.

Here’s a clear breakdown of the four biggest updates and what they mean for borrowers heading into 2026.

1. SAVE Plan Borrowers Will Be Forced Into a New Repayment Program

The biggest shock of the year: the SAVE plan is officially ending.

Earlier this month, the Education Department and Secretary Linda McMahon confirmed that SAVE will be dismantled following a legal settlement with several Republican-led states a case originally spearheaded by Missouri. The program had already been on ice for most of 2025 due to a federal injunction, and the Trump administration chose not to continue defending it in court.

Congress accelerated the program’s demise by passing the One Big, Beautiful Bill Act (OBBBA), which scheduled SAVE to sunset by 2028. The new settlement simply speeds up the burial.

The bottom line:
Over seven million borrowers currently enrolled in SAVE will have to move into a new repayment plan.

There’s growing speculation that borrowers will begin transitioning out of SAVE sometime in the first half of 2026. That timeline aligns with the anticipated launch of the new Repayment Assistance Plan (RAP) a program that advocacy groups warn may leave some borrowers worse off.

Borrowers should expect formal instructions on required plan changes sometime next year, and the shift will likely be mandatory.

2. IBR Is Expanding And It’s Now Open to Higher-Income Borrowers

Amid all the uncertainty, the Education Department did announce one positive update: the Income-Based Repayment (IBR) plan has officially been expanded.

Thanks to the OBBBA, IBR is the only income-driven repayment plan guaranteed to remain long-term. SAVE, PAYE, and ICR are all scheduled to wind down by 2028, which means millions of borrowers will eventually have to choose between IBR or the upcoming RAP.

Previously, IBR restricted access through a “partial financial hardship” requirement a rule that blocked higher-income borrowers and those with smaller balances from qualifying. That rule has now been eliminated.

On December 22, 2025, the Education Department updated internal systems to remove the hardship requirement entirely. Borrowers who were denied IBR earlier in the year should now reapply, as income is no longer a barrier to approval.

Under the updated rules:

• Payments are still capped based on what a borrower would pay on a 10-year Standard plan.

• Removing the hardship test ensures a clear path for millions transitioning out of SAVE, PAYE, and ICR especially those pursuing long-term loan forgiveness.

This expansion creates a more stable landing spot for borrowers as older plans phase out in 2026–2028.

3. Student Loan Forgiveness Has Restarted But Only for One IDR Plan (For Now)

In another important update, the Education Department has restarted student loan forgiveness for borrowers who have reached 20- or 25-year milestones under income-driven repayment but only under IBR.

According to a December court filing:

• 170 borrowers received IBR loan forgiveness in November, marking the first approvals since the processing freeze earlier this year.

• Courts have repeatedly upheld forgiveness under IBR, clearing the legal path for processing to resume.

However, forgiveness for borrowers in ICR and PAYE has not restarted yet despite the Department’s earlier commitment to resume processing this fall.

The Department says system updates are still underway, and expects ICR and PAYE forgiveness checks to begin around February 2026, with eligibility reviewed every other month through the National Student Loan Data System (NSLDS).

This means borrowers in IBR may see movement soon, while those in PAYE or ICR will need to wait a bit longer for their forgiveness milestones to be honored.

4. Wage Garnishment for Defaulted Student Loans Returns in 2026

For the first time in more than five years, the government is preparing to restart administrative wage garnishment for borrowers in default.

Beginning as early as January, borrowers who have not resolved their default status may receive notices warning that up to 15% of their paycheck can be automatically seized without a court order.

Key points borrowers should know:

• Only those in default are at risk.

• Payments taken through garnishment do not count toward forgiveness programs such as IDR or PSLF.

• Once a garnishment begins, it can be difficult to stop without rehabilitating or consolidating the loan.

Millions of borrowers who fell into default prior to or during the pandemic protections may only have a few weeks left to act before garnishments begin.

The Bottom Line

Federal student loan policy is entering another major transition period, and the decisions made in early 2026 will affect years of repayment, forgiveness, and financial stability for millions of borrowers. By staying informed and understanding these changes now, borrowers can position themselves for the most affordable repayment options and avoid unnecessary setbacks as new rules take effect.