Navigating Student Loan Repayment Plans and Collections in 2026
It has been a period of significant confusion for individuals managing student loans in the United States. Collections activities have restarted and then been placed on hold, while borrowers simultaneously grapple with evolving changes to key forgiveness programs. Last year, the long-contested SAVE plan, introduced by the Biden administration, concluded with a settlement agreement. Concurrently, President Donald Trump's "Big Beautiful Bill" introduced new borrowing limits for graduates and raised challenges to the Public Service Loan Forgiveness program. While several modifications for student loan borrowers are scheduled to take effect this summer, numerous critical questions remain unresolved.
According to data from the Education Department, more than 5 million Americans were in default on their federal student loans as of September. Millions more are behind on their loan payments and face the risk of default this year. Winston Berkman-Breen, legal director at Protect Borrowers, expressed concern, stating, "Borrowers genuinely struggle to afford their loans, and then to hear that the administration is making it more expensive and taking away some of the tools and resources that help folks afford their loans is really panic-inducing."
Key Developments and What Borrowers Need to Know
Last month, the Education Department announced a delay in involuntary collections for student loan borrowers in default until the department finalizes its new loan repayment plans. The exact timeline for this finalization remains unclear. For student loan borrowers, understanding the following key points is essential.
If You Were Enrolled in the SAVE Plan
The SAVE plan was a repayment program offering some of the most lenient terms ever available. Shortly after its launch, it faced legal challenges, leaving millions of student loan borrowers in a state of uncertainty. In December, the Education Department announced a settlement agreement to terminate the SAVE plan. The future for borrowers previously enrolled in this repayment plan is yet to be determined.
Berkman-Breen noted, "Seven and a half million borrowers who are currently enrolled in SAVE need to be moved to another plan." As part of the agreement, the Education Department has stated it will not enroll new borrowers, will deny pending applications, and will transition all current SAVE borrowers into alternative repayment plans.
Kate Wood, a lending expert at NerdWallet, advised that while the Education Department is expected to develop a transition plan for borrowers moving from the SAVE plan, individuals should proactively enroll in other repayment options.
If You Are Looking to Enroll in an Income-Driven Repayment Plan
Borrowers can apply for several income-driven repayment plans, including the Income-Based Repayment Plan, the Pay as You Earn plan, and the Income-Contingent Repayment plan. Berkman-Breen explained, "They all have similar criteria, and they function similarly. Your payment is set as a percentage of your income, not how much you owe, so it's usually a lower payment."
The payment amount under these plans is calculated as a percentage of discretionary income, with the specific percentage varying by plan. Jill Desjean, director of policy analysis at the National Association of Student Financial Aid Administrators, cautioned that due to high demand from individuals switching plans, some applications for income-driven repayment plans may experience longer processing times.
Borrowers can utilize the Education Department's loan simulator to determine which repayment plan might be most suitable for their financial situation.
If You're Working Toward Public Service Loan Forgiveness
Currently, there are no changes to the Public Service Loan Forgiveness Program. However, last year, the Trump administration announced plans to alter eligibility requirements for participating nonprofits. The proposed policy aims to disqualify nonprofit workers if their work is deemed to have a "substantial illegal purpose."
The Trump administration argues this measure is necessary to prevent taxpayer money from supporting lawbreakers, while critics contend it transforms the program into an instrument of political retribution. The proposal defines illegal activity to include trafficking or "chemical castration" of children, illegal immigration, and support for foreign terrorist organizations. This change could potentially exclude some teachers, doctors, and other public workers from federal loan cancellation.
Wood commented, "This is something that obviously is very stressful and nerve-wracking for a lot of people, but given that we don't know exactly how this is going to be enforced or how these terms are going to be defined, it's not really something you can try to plan ahead for now."
Although this policy is currently being challenged by 20 Democrat-led states, it is expected to take effect in July. In the interim, Wood recommends that borrowers enrolled in the PSLF program continue making their payments.
If Your Student Loans Are in Default
Involuntary collections on federal student loans will remain on hold. The Trump administration announced earlier this month that it is delaying plans to withhold pay from student loan borrowers who default on their payments. Federal student loan borrowers risk wage garnishment and the withholding of federal tax refunds if they default on their loans. Borrowers are considered in default when they are at least 270 days behind on payments.
If your student loans are in default, you can contact your loan holder to apply for a loan rehabilitation program. Wood explained, "They essentially come up with a payment plan where you're making a reduced payment. After five successful payments on that rehabilitation plan, wage garnishment will cease."
If You're Planning to Attend Graduate School
Trump's "Big Beautiful Bill" has altered the amount graduate students can borrow from federal student loans. Previously, graduate students could borrow up to the cost of their degree; the new rules impose caps based on whether the degree is classified as a graduate or professional program.
Wood clarified that individuals starting a new program and taking out a loan after July 1 will be subject to these new loan limits. Under the new plan, students in professional programs can borrow up to $50,000 per year and up to $200,000 in total. Other graduate students, such as those pursuing nursing and physical therapy, are limited to $20,500 per year and up to $100,000 total.
The Education Department defines the following fields as professional programs: pharmacy, dentistry, veterinary medicine, chiropractic, law, medicine, optometry, osteopathic medicine, podiatry, and theology.
If You Want to Consolidate Your Loan
The online application for loan consolidation is accessible at studentaid.gov/loan-consolidation. If you have multiple federal student loans, you can combine them into a single loan with a fixed interest rate and a single monthly payment. The consolidation process typically takes around 60 days to complete, and you can only consolidate your loans once.
