The state of student loans in 2026

If you haven’t been keeping up, here is some news regarding the laws and repayment options around student loans in 2026.

If you’re not confused about the state of student loan repayment in 2026, then you haven’t been paying attention.

The current administration is in the process of trying to dismantle the very agencies that they run, and they also seem to have a particular grudge against those in higher education. (I think someone up high “loves the uneducated”.)

Gone are the days of trying to cancel (or reduce) student loans for the masses. In its place are reduced benefits, higher minimum payments, and a general sense of confusion.

With all this in mind, I’m here to try and distill what’s going on, so you have a better sense of it. After all, there is $1.75 trillion in total student loan debt out there, so I’m sure this affects many of you.

(Note: I’ll only be talking about undergraduate Federal loans here, unless I specify otherwise.)

You have to start paying your loans back

There was a time back during the pandemic when repayment was paused. That time has ended. If you have a balance on your student loans, you need to start making monthly payments. The only exception on this seems to be those on the SAVE repayment plan, but see below on that.

If it’s been a while, and/or you’re not sure how much you owe or who you owe to, the CFPB has a page on where you can find information.

You’re not getting your wages garnished (for now)

There was a moment when there was a plan to garnish the wages of any borrower who was in default (generally defined as 270 days of missed payments). That meant that the Department of Education could reduce your paycheck by up to 15% in after-tax wages and put that money toward servicing the debt.

Well, that appears to be on hold for now. There are no specific plans to put this back into action, but know that it might happen, and if it does, we’ll probably get very little notice about it.

SAVE is dead. Long live SAVE.

The SAVE plan was a Biden-era student loan repayment plan that offered a better deal to borrowers (lower monthly payments, shorter forgiveness timeline) than other income-based payment plans.

Well, no more. Republicans who may be aligned with the student loan industry sued to have the plan eliminated, and basically won.

If you are on this plan, you want to start thinking about moving off it, but unless you’re told you have to, you technically don’t yet. (But you will eventually.)

New income-based repayment options

For a long time there was an alphabet soup of income-based repayment options (ICR, PAYE, SAVE, etc.). This is being simplified, as many of these options are going away.

Soon, we’ll be left with the existing standard Income-Based Repayment (IBR) plan, as well as a new Repayment Assistance Plan (RAP).

Thankfully, the Student Loan Simulator still exists, and you can use it to determine the best option for your situation.

The “tax bomb” is back

Years ago, if you got your student loans forgiven, you would owe income taxes on the amount that was forgiven.

So if you got (say) $20,000 forgiven, then when tax time came around, $20,000 would be added to your income for tax purposes. That would mean thousands of dollars in taxes on the federal level. (A few states would levy state taxes too.)

Then, a few years back, sanity prevailed. Some smart person said, “why are we going to forgive a long-term debt on one hand, and then force people to pay a quarter of it immediately on the other hand?”. They got rid of this “tax bomb”.

Then, we have our current administration. As of 2026, the tax bomb is back on the table. So if you are eligible for student loan forgiveness, be ready for a big tax bill.

(Note that this doesn’t apply to PSLF, but see below.)

PSLF may be next

Nothing so far is affecting the Public Service Loan Forgiveness program (PSLF) now.

But I wouldn’t hold my breath.

The administration can’t unilaterally cancel PSLF, as it was created by Congress. But they can certainly make it harder for people to claim.

So be aware that the rules around PSLF forgiveness—now generous at 10 years to incentivize working in high-need, lower-pay positions—may be changing.

It’s hard to have much faith in the loan forgiveness option right now. I wouldn’t be surprised if there are millions of people who are on the PSLF track who will get to the end of their 10 years and find that they aren’t eligible for loan forgiveness for some reason. So I’m sorry to say it, but please don’t plan your career and your financial life around this, as it may not pan out.

Bottom line

The situation with student loans is a little grim now. The Department of Education is playing hardball with borrowers. Which, okay fine, is their right to do, though I’m not sure how much this makes sense with millions of borrowers falling behind in their payments.

But ultimately, we don’t know what’s going to happen in the future. A few years ago, we were feeling optimistic that there might be new laws to cancel some of borrowers’ student loan debt. Who knows what might happen a few years from now?

In the meantime, keep paying (or start paying). It’s no fun, but I believe the alternative is worse.