Navigating the New Student Loan Landscape: What Borrowers Need to Know in 2025

¿Prefieres leer esto en español? [Haz clic aquí para la versión en español.]

By now, you’ve probably heard that there’s been an executive order focused on student loan forgiveness. According to the Department of Education, more than 5 million student loans are currently in default. So if that’s you, you’re not alone.

Whether you’re carrying student loan debt, preparing to borrow, or just trying to make sense of the headlines, here’s what you need to know (and what you can do about it).

Loan Collections Are Back

As of May 5, 2025, collections have officially resumed for borrowers in default on their federal student loans. That means things like wage garnishment, tax refund seizures, and Social Security offsets are now back in effect. Collections were paused during the pandemic, but that pause has ended, and about 9 million borrowers could be affected.

If you’re in good standing? You’re fine for now. But if you’re in default, it’s not too late to take action.

Hardship Pause OptionIf you’re in default and facing wage garnishment, you may be eligible to request a temporary hardship forbearance through your loan servicer. It won’t solve everything but can give you breathing room while you set up rehabilitation or consolidation.

Changes to Public Service Loan Forgiveness (PSLF)

Another big shift? Changes to Public Service Loan Forgiveness.The Public Service Loan Forgiveness (PSLF) program was established in 2007 to forgive student loans for borrowers who work for qualifying nonprofit organizations or public service organizations and make 120 on-time payments.

However, eligibility is tightening under a new executive order signed in March 2025. Now, PSLF will only apply to roles that meet updated criteria aligned with "American values."

Translation: Some previously qualified nonprofits and advocacy organizations may no longer meet the new criteria. If you’re relying on PSLF, it’s time to:

• Confirm that your employer still qualifies.

• Keep detailed records of your job history and payments.

• Ask your servicer for written documentation.

  
  

Legal Pushback on PSLF Changes: Several advocacy groups have filed lawsuits challenging the new PSLF restrictions, arguing that they unfairly target certain communities. These legal challenges could delay implementation or lead to reversals. It’s a good idea to stay flexible and informed.

My Loans Are in Default. What Now?

Here’s the deal:

• Collections resumed May 5

• Seizures from tax refunds and recurring payments are scheduled to begin in June.

• If you haven’t made payments in over 270 days, expect an email from Federal Student Aid with the next steps.

A default status can tank your credit score and trigger aggressive collections. But there are two ways out:

• Loan Rehabilitation: Make nine on-time, reasonable payments over 10 months

• Loan Consolidation: Combine your defaulted loans into a new one and commit to an income-driven plan

Important: consolidating resets any progress you’ve made toward PSLF or other forgiveness programs.

What If I Can’t Afford to Pay Back My Loans?

If your budget is tight, contact your loan servicer to see if you qualify for income-driven repayment (IDR). IDR plans base your monthly payment on your income and family size, sometimes as low as $0/ month.

Watch Your Inbox:

Loan servicers have started sending updates about repayment plans—including details about the SAVE Plan, which can further lower payments and shorten forgiveness timelines for some borrowers. Don’t miss these notices—they may require action.

Pro tip: Avoid ghosting your loans. Ignoring the problem can make it worse.

Can the Government Really Garnish My Wages?

Yes. If your loans are in default, the federal government can:

• Garnish up to 15% of your wages

• Take your entire tax refund

• Reduce your Social Security benefits

This is why getting out of default is critical as soon as possible.

What Happens If the Department of Education Is Dismantled?

An executive order dated March 2025 proposed transitioning student loan servicing to the Small Business Administration (SBA) and dissolving the U.S. Department of Education.

Here’s what we know:

• No immediate changes to your payments or loan servicer

• A transition would require Congressional approval

• Expect more confusion, potential customer service delays, and a new structure for forgiveness programs

Regardless of political changes, your loan balance still exists. The key is staying informed and proactive.

What Borrowers Should Do Right Now

• Log in to your StudentAid.gov account

• Check your status: Are you current, in deferment, or in default?

• Update your contact info with your loan servicer

• Ask about your repayment plan

• Keep records: Save emails, payment confirmations, and eligibility letter

• Stay informed: Sign up for updates from trusted sources (and follow Future Bound for real talk)

Final Thoughts

If all of this feels overwhelming, you’re not the only one. Student loan policy is changing fast; it can feel like a full-time job just keeping up. The good news? You don’t have to understand it immediately, but staying informed and taking small steps now can help protect your future self from bigger headaches later.

Got questions about financial aid or scholarships? That’s where Future Bound comes in. Send me a message or schedule a free consultation to get the support you need—no judgment here.