Federal Student Loan Policy Changes: What Borrowers Need to Know

Federal student loan policy has undergone significant changes over the past several years, producing a complex and at times confusing landscape for borrowers. The pause on student loan payments that began in March 2020, multiple rounds of targeted debt cancellation, the introduction of new income-driven repayment plans, and ongoing litigation over presidential authority to cancel debt have all contributed to a policy environment that has been difficult for borrowers to navigate. This is a factual overview of major developments and their current status. The COVID-19 payment pause, which suspended required payments and interest accrual on most federally held student loans beginning in March 2020, ended in September 2023 after multiple extensions. The resumption of payments affected approximately 40 million borrowers who had not made required payments for more than three years. The Department of Education implemented an on-ramp period through September 2024 during which borrowers who missed payments would not be reported to credit bureaus or placed in default, intended to ease the transition back to repayment. The SAVE plan, an acronym for Saving on a Valuable Education, was introduced by the Biden administration in 2023 as a new income-driven repayment option. The plan substantially reduced required payments for most borrowers relative to earlier IDR plans, calculating payments based on 5 percent of discretionary income for undergraduate loans and 10 percent for graduate loans, with a higher exemption for low-income borrowers. For many low-income borrowers, the calculation produced payments of zero dollars per month. The plan also expanded forgiveness timelines and eliminated interest capitalization in certain circumstances. Litigation challenging the plan reached federal appellate courts, and its implementation has been subject to legal uncertainty. Broad-based student debt cancellation has been the subject of significant executive action and litigation. The Biden administration's initial cancellation plan, which would have cancelled up to 20,000 dollars in debt for eligible borrowers, was struck down by the Supreme Court in 2023 in Biden v. Nebraska, which held that the administration had exceeded its statutory authority under the HEROES Act. The administration subsequently pursued cancellation through alternative legal authorities, including the Higher Education Act, a path that remained subject to ongoing legal challenge. Public Service Loan Forgiveness has been a significant focus of administrative action. Changes to PSLF processing resulted in substantially higher approval rates for borrowers who had been denied under earlier requirements, and a temporary waiver program allowed borrowers to count previously ineligible payments. The program continues to operate for borrowers who work in qualifying public service employment and make 120 qualifying payments, with forgiveness of remaining balances after meeting those conditions. Income-driven repayment plans generally require borrowers to recertify their income annually to maintain their payment amounts. The recertification process has been a point of administrative friction, with many borrowers failing to complete recertification on time and being placed in higher payment amounts. The Department of Education has worked with servicers on processes to streamline recertification, and some automatic recertification options have been developed using IRS income data. Student loan servicing has been a source of significant borrower complaint and error documentation. The transition of large borrower accounts between servicers has produced periods of confusion and processing errors, with some borrowers experiencing issues with payment processing, account information, and access to IDR and forgiveness programs. The Consumer Financial Protection Bureau and Department of Education have both undertaken oversight of servicer compliance. For borrowers seeking to understand their current situation, the Department of Education's studentaid.gov website provides information about current repayment options, loan balance information, and access to IDR applications. Borrowers with questions about their specific situations may benefit from consulting with a student loan counselor, many of whom are available through nonprofit organizations and state agencies at no cost.