The federal student loan system has gone through major updates over the past year — and even bigger changes to student loans are just weeks away. Legal battles, shifting policies, and new rules under the One Big, Beautiful Bill Act (OBBBA) have created uncertainty, but borrowers now have clearer guidance on what’s coming next.
Below is a breakdown of the big changes to student loans that borrowers should prepare for.
🔄 IBR Plan Expands Before December: One of the Biggest Changes to Student Loans
One of the earliest big changes to student loans under the OBBBA is the expansion of the Income-Based Repayment (IBR) plan. The law requires the Department of Education to phase out the ICR, PAYE, and SAVE plans by July 2028, leaving only two income-driven plans available:
- IBR
- RAP (Repayment Assistance Plan) — launching next year
To help borrowers transition, the OBBBA removes the partial financial hardship rule that blocked higher-income borrowers from joining IBR. This is one of the most important big changes to student loans, as it finally opens IBR to more people.
However, the Education Department didn’t update its systems right away, causing some borrowers to be incorrectly rejected. After a lawsuit by the American Federation of Teachers, the department confirmed it will complete system updates by end of December. Borrowers who were denied due to the old rule should reapply now so their application is held until processing resumes.
💸 Loan Forgiveness Under IDR Becomes Taxable Again in January
Another one of the big changes to student loans is the return of federal taxes on income-driven repayment (IDR) forgiveness.
Here’s what changes:
- Beginning January 1, 2026, forgiveness under IBR, ICR, and PAYE becomes taxable again.
- The temporary tax relief provided by the 2021 American Rescue Plan expires at the end of 2025.
- Borrowers may receive a 1099-C form, requiring them to report forgiven debt as taxable income.
The Education Department confirmed it will not issue 1099-C forms for any borrower who reaches forgiveness eligibility before December 31, 2025, even if discharge occurs in 2026. Borrowers in the paused SAVE plan should switch into an IDR plan before December 2025 to secure this protection.
Because these are some of the most financially impactful big changes to student loans, borrowers who expect forgiveness after 2026 should speak with a tax advisor to understand possible liabilities and exemptions.
📅 More Major Changes to Student Loans Begin in 2026
Beginning in 2026, even more big changes to student loans will roll out:
🔹 New Borrowing Limits
Starting July 1, 2026, new annual borrowing caps will apply to undergraduate and graduate students. This may affect how families finance education.
🔹 Parent PLUS Borrowers Face Strict Deadlines
Parent PLUS borrowers will face some of the most urgent big changes to student loans:
- They must consolidate into a Direct Consolidation Loan before July 1, 2026
- Without consolidation, they will lose eligibility for all IDR plans
- To maintain access to forgiveness, they must:
- Enroll in ICR
- Make at least one payment before July 1, 2028
- Then switch to IBR once ICR phases out
🔹 RAP Plan Launches
The new Repayment Assistance Plan (RAP) is expected in summer 2026. Borrowers in SAVE forbearance may be required to switch plans depending on court rulings.
🧭 Final Thoughts: Borrowers Must Prepare Now
With so many big changes to student loans happening in a short period, borrowers should review their loan types, repayment plans, and timelines carefully. The decisions made in the coming weeks could determine:
- Access to lower monthly payments
- Eligibility for future forgiveness
- Whether or not forgiven debt becomes taxable
- Which repayment options remain open
These big changes to student loans carry high stakes, but with early preparation, borrowers can protect their long-term financial wellbeing.
People also read:
KSI’s Net Worth Is Exploding And His Prime Stake Is A Major Reason Why
ByHeart Infant Formula Recall Leaves Parents Questioning Safety
