Expected Changes to Student Loans in 2025

Big shifts are already underway for student loans in 2025. President Trump is back in office, and his administration has already rolled out several new executive orders that could significantly change how student loans work—from who manages them to how you pay them back. 

Some of these 2025 student loan updates are already in motion, while others are still taking shape. Whether you have student loans or plan to borrow in the future, this is the time to stay informed and prepare for what might be ahead. 

Key Takeaways

• Student loan management may move from the Department of Education to the Department of the Treasury or Small Business Administration, which could change how federal loans are serviced.
• Federal loan repayment and forgiveness programs may change. You might see fewer options or changes to programs like Public Service Loan Forgiveness (PSLF).
• Certain tax breaks for student loan borrowers may end in 2025, like tax-free loan forgiveness and the student loan interest deduction.
• Lawmakers are considering other tax changes that could impact borrowers, like removing the nonprofit status of hospitals, which could affect PSLF eligibility for workers.

Changes to the Department of Education

On March 20, President Trump signed an executive order to begin phasing out the Department of Education (ED) and reassigning key programs, such as student loans and special education services, to different departments. According to the administration, the goal is to give states more control and cut back on federal involvement. 

This could result in some of the biggest student loan changes in 2025. These changes won’t happen overnight, of course, but some have already started. Two areas are changing the most: who manages your loans and how repayment might work.

Changing Who Manages Student Loans

As part of this overhaul, President Trump proposed to move student loan oversight from the Department of Education to the Small Business Administration (SBA). Transitioning oversight to the Treasury Department is another possibility.

The timeline for this transition is uncertain. While President Trump stated this would happen immediately, Congress will need to act in support of the proposed changes. 

If you have existing federal loans, the terms and conditions won’t change, but you could see changes in customer service, repayment plan options, or paperwork if loan oversight moves to another government agency. If you have private student loans, everything will stay the same, because these changes don’t affect private lenders.

Impact on Repayment and Forgiveness

The administration also wants to make changes to income-driven repayment (IDR) plans, which allow you to pay back federal student loans based on your income. It all started with a court order blocking the SAVE Plan, a Biden administration program, from going into effect. The Trump administration then removed all IDR applications from the ED website. As of March 26, the applications for Income-Based Repayment, Income-Contingent Repayment, and Pay As You Earn plans are back up, and servicers are expected to begin processing them again soon. But the future of SAVE Plans remains uncertain. 

While eligibility requirements for student loans and IDR plans haven’t changed, your repayment and forgiveness options may have. Many borrowers on IDR plans have been placed in forbearance, with no confirmation of how long it could last—and for some, the time spent in forbearance doesn’t count toward their Public Service Loan Forgiveness (PSLF) timeline.

As far as PSLF goes, the program still exists, but lawmakers may change the definition of “public service”—and therefore which jobs qualify for forgiveness. 

The bottom line is that there is still a lot of uncertainty regarding 2025 student loan repayment changes under IDR and PSLF. If you’re enrolled in these programs, download your Federal Student Aid (FSA) information to keep tabs on your loan details, and ensure your contact information is up-to-date with your loan servicer so you’ll receive any important communications.

Changes to Taxes and Student Loans

It’s not just ED programs making student loan repayment changes in 2025. While President Trump is leading the changes in the executive branch, lawmakers in Congress are considering tax reforms that could directly impact borrowers. Here’s what’s being considered.

Taxing Student Loan Forgiveness and Discharge

Student loan forgiveness or discharge means you don’t have to pay back some or all of your federal loans. In general, forgiven or discharged debt is taxable. 

Under the American Rescue Plan Act of 2021, certain student loans forgiven between January 1, 2021 and December 31, 2025, are exempt. But those tax protections are set to end after 2025 unless Congress steps in. 

If this exemption expires, it means that loans forgiven after December 31, 2025, will be taxable. For example, if the government forgives $30,000 in loans, that amount will be added to your taxable income. Lawmakers haven’t made a final decision, but time is running out to keep the tax break in place.

Student Loan Interest Tax Deductions

Currently, you can deduct up to $2,500 in student loan interest each year when you file your taxes. This deduction lowers your taxable income and can help reduce your overall tax bill, and borrowers across the country rely on it. As lawmakers debate how to offset other planned tax cuts, a leaked memo from the U.S. House Budget Committee indicated the Student Loan Interest Tax Deduction may be on the chopping block. If you claim this deduction, keep an eye on what Congress decides this year.

Eliminating the Nonprofit Status of Hospitals

According to the same memo, lawmakers are also considering changing the tax-exempt status of nonprofit hospitals. Eliminating their nonprofit status would mean they would have to pay taxes like for-profit businesses. This may sound unrelated to student loans, but it could impact healthcare workers working toward Public Service Loan Forgiveness (PSLF). PSLF allows borrowers to qualify for federal loan forgiveness after 10 years of making payments while working at nonprofit or government jobs. If hospitals lose their nonprofit status, employees there might no longer qualify for PSLF. 

This suggested change is not set in stone. If it were officially proposed, it could be one of the biggest student loan changes in 2025 because of the number of nurses, doctors, and other hospital staff working toward PSLF.

Taxing Scholarships and Fellowships

Right now, students don’t pay taxes on scholarships and fellowships that go toward tuition and other qualified school expenses. That tax break makes it easier for graduate students and low-income students to afford higher education. Making these funds taxable income is another suggestion mentioned in the leaked House Budget Committee document.

If this happens, students would need to report their scholarship or fellowship money when filing taxes. While it’s still under debate, students and schools across the country are watching this issue closely.

What It All Means for You

With nearly 43 million student loan borrowers in the U.S., it’s no surprise that student loan changes in 2025 are a hot topic. Some changes are already in motion, while others are still in the early stages of debate. The best thing you can do to prepare for possible changes is to stay informed about your loan details and official news. Here are a few ways to stay ready:

• Log into your loan servicer account regularly. Watch for updates and make sure your contact info is correct.
• Sign up for alerts from the FSA. They’ll communicate any changes in oversight.
• Follow reliable news sources. Stick to outlets that cover student loan policy clearly and factually.
• Keep records. Save emails, letters, or statements from your loan servicer, especially if you’re working toward forgiveness.

Current students and those paying back loans are facing confusion and uncertainty in 2025. Whether you have federal or private student loans, contacting your loan servicer or a financial advisor is a good place to start if you have questions.

FAQs

What are the major student loan policy changes coming in 2025?

First, the federal government plans to move student loan management from the Department of Education to the Small Business Administration or Treasury Department. This could affect how you apply for loans, repay them, or contact customer service. There may also be changes to federal loan repayment plans, loan forgiveness, and tax rules, although they’re not yet final. 

Will there be any new student loan forgiveness programs in 2025?

So far, no new forgiveness programs have been approved this year. Lawmakers are still debating whether to change current programs like Public Service Loan Forgiveness (PSLF) or income-driven repayment forgiveness. However, these changes are more likely to result in fewer options for students, not more.  

Should I refinance my student loans before the 2025 changes take effect?

It depends. Most of the potential 2025 student loan changes are still uncertain. Borrowers on income-driven repayment plans or working toward Public Service Loan Forgiveness might want to wait and see how it all shakes out. However, borrowers with good credit scores might be able to get a better interest rate by refinancing to a private loan, lowering their monthly payments and paying less over the life of the loan. Refinancing to a private loan could also provide stability in a time of uncertainty, as policy changes to federal student loans would not impact your private loan terms.

Will the student loan changes in 2025 impact private student loan interest rates?

The 2025 policy changes apply to federal loans, not private ones. Your private loan interest rate depends on your lender and the current market, not federal rules. That said, if the overall economy shifts because of these changes, lenders could adjust their rates too—but not directly because of the student loan policies.

Will closing the Department of Education make private student loans a better option?

Closing the Department of Education probably won’t affect the appeal of federal loans. However, other actions might. For example, if Congress makes changes to federal student loan forgiveness or eligibility, it could make private loans more appealing. Nothing is final, and students should keep an eye on any changes.