Student loan borrowers are facing renewed uncertainty in 2025 as federal repayment programs shift again. Legal challenges, delayed applications, and resumed collections are creating confusion for millions. Over 5 million borrowers in default now risk wage garnishment as repayment enforcement ramps up.
Here’s what borrowers need to know.
Collections resume for defaulted student loans
The U.S. Department of Education has started collecting payments from borrowers in default. More than 5.3 million Americans are now subject to wage garnishment and tax refund seizures unless they take immediate action.
To avoid those consequences, borrowers should:
- Contact their loan servicer directly
- Visit the Default Resolution Group
- Enter a loan rehabilitation program
- Apply for an income-driven repayment (IDR) plan
Income-driven repayment applications are open again
Earlier this year, a federal court blocked parts of the SAVE Plan, causing a temporary freeze on IDR applications. However, the Department of Education reopened applications on May 10 following pressure from advocacy groups.
Although borrowers can now apply for IDR plans like IBR, PAYE, and ICR, application processing may take longer than usual. Delays are due to both legal uncertainty and reduced staffing.
Borrowers should:
- Use the loan simulator at studentaid.gov to compare plans
- Monitor their loan dashboard for updates
- Expect slower approvals than in previous years
SAVE Plan participants remain in forbearance
Borrowers already enrolled in the SAVE Plan are not required to make payments while a court decides the program’s future. During this administrative forbearance:
- Payments are paused
- Interest does not accrue
- Time does not count toward Public Service Loan Forgiveness (PSLF)
The Department of Education will issue updates as the legal process moves forward. Meanwhile, borrowers should consider enrolling in other repayment plans to avoid delays in forgiveness progress.
Consolidation and forgiveness remain available
The online loan consolidation application is fully functional again. Borrowers with multiple federal loans can consolidate them into a single fixed-rate loan.
Key details include:
- The process typically takes up to 60 days
- Borrowers may only consolidate once
- A consolidated loan simplifies repayment and tracking
If your student debt has already been forgiven, you are unlikely to see it reinstated. So far, the Department of Education has not reversed any approved cancellations.
PSLF continues—for now
The Public Service Loan Forgiveness program remains active, despite recent political proposals to restrict it. An executive order signed by former President Donald Trump seeks to limit PSLF eligibility for some nonprofits. However, the order has not yet been enforced.
Borrowers pursuing PSLF should:
- Continue making qualifying payments
- Keep employment certification up to date
- Save all communication and loan statements
Frustrations grow over loan servicing delays
Many borrowers report long wait times and technical issues when contacting their loan servicers. Some tools, such as the income-driven repayment tracker, have disappeared from the federal loan portal.
To manage these challenges:
- Take screenshots of payment and plan history
- Save emailed or mailed notices
- Document all service interactions and requests
These steps can help you maintain records in case errors arise later.
Behind on payments? Act quickly
Borrowers who are delinquent but not yet in default still have options. Acting fast can prevent credit score damage and collections.
Recommended actions include:
- Requesting forbearance or deferment
- Applying for an IDR plan to reduce payments
- Speaking with a servicer about rehabilitation
How loan rehabilitation works
Borrowers can exit default by enrolling in a loan rehabilitation program. This option requires nine on-time monthly payments, calculated based on your verified income and expenses.
Once completed:
- Your loan is removed from default
- Collections stop
- The default status is cleared from your credit history
Keep in mind that rehabilitation can only be used once.
Fresh Start has ended
The Fresh Start program, which helped borrowers exit default during the pandemic, ended on August 31, 2024. No new applications are being accepted.
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