Student Loan Repayment Changes May Lead to Higher Costs for Borrowers

Millions of Americans with federal student loans could soon face significantly higher monthly payments. New analysis shows that upcoming changes to repayment rules, originally set during the Trump administration, are scheduled to take full effect in 2026. These changes are expected to reshape the cost of borrowing for education across the country.

Why Monthly Payments Are Set to Rise

The expected increase is tied to the expiration of key provisions in popular income-driven repayment plans. Specifically, the SAVE plan and the PAYE plan, which cap monthly payments based on a borrower’s income, may see major alterations. Many borrowers currently enrolled in these plans could lose their eligibility or see their payment formulas change.

Under the current SAVE plan, for example, payments for many borrowers are calculated as a percentage of their discretionary income. The scheduled changes would adjust this calculation, potentially requiring borrowers to pay a larger share of their income each month. This shift is not a new proposal but the result of a timeline set by rules established several years ago.

The Potential Financial Impact on Borrowers

The financial impact for individual borrowers could be substantial. For some, monthly bills could jump by hundreds of dollars. This creates a new financial burden for households already managing budgets strained by inflation and other costs.

Families and Parent PLUS loan borrowers are expected to face the steepest increases. These loan types have different repayment rules and may not qualify for the same income-driven protections as direct student loans. A parent who borrowed to fund their child’s education could see their required payment rise sharply, affecting their retirement savings and overall financial stability.

Broader Changes to Repayment and Forgiveness

The changes go beyond just monthly payments. They will also reshape the timeline for loan forgiveness nationwide. Income-driven plans typically forgive any remaining debt after 20 or 25 years of qualifying payments. With higher monthly payments, borrowers may pay off their loans faster, but the trade-off is a much heavier burden during their repayment years.

For others, the changes could lengthen their time in debt if they are moved to a standard repayment plan with a different structure. This creates uncertainty for people who have built their financial plans around a specific forgiveness timeline.

Financial advisors recommend that borrowers prepare for these potential changes now. They suggest reviewing your current repayment plan, understanding the rules that govern it, and contacting your loan servicer for personalized information. While the full changes are not set to occur until 2026, planning ahead is crucial to avoid a sudden and difficult financial shock.