Quick Answer: Major student loan changes are hitting in 2026. The SAVE plan is being terminated, new repayment plans take effect July 1, payments could increase by $2,800–$3,400 per year for many borrowers, and wage garnishment is resuming for defaulted loans. With 10 million borrowers on track to enter default, understanding your options now is critical.
And there’s a tax change to know about for 2026: student loan forgiveness is taxable again in 2026 for income-driven repayment plans — though PSLF and several other programs stay tax-free, and the insolvency rule can erase the bill for many.
If you have federal student loans, everything about your repayment is about to change. Here’s what’s happening and what you can do.
The federal student loan landscape is undergoing its most significant overhaul in years. The Department of Education is ending the SAVE plan, Congress created new repayment plans starting July 1, 2026, and monthly payments could nearly triple for some borrowers. For the latest on what borrowers should do next, see my updated coverage: SAVE Plan Ruled Permanently Illegal: What Student Loan Borrowers Must Do Next.
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What’s Changing
SAVE Plan Is Being Terminated
The Department of Education announced it will no longer enroll new borrowers in the SAVE (Saving on a Valuable Education) plan and is transitioning its approximately 7 million current enrollees into alternative repayment plans. The plan is expected to be fully terminated in the first half of 2026.
Two New Repayment Plans (Starting July 1, 2026)
Congress created two new plans that will replace all current options for new borrowers:
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New Standard Plan
- Repayment window of 10–25 years based on loan balance
- Fixed monthly payments
- No income-based calculation
Repayment Assistance Plan (RAP)
- Payments based on total adjusted gross income (AGI)
- Interest waived beyond monthly payment amount
- Replaces current IDR plans for new borrowers
Payments Could Increase Significantly
According to Protect Borrowers, many borrowers will see sharp payment increases:
Example: A single borrower earning $50,000 with undergraduate loans could pay ~$110/month under SAVE, versus $325/month under IBR, or $210/month under the new RAP plan. Annual payment increases estimated at $2,800–$3,400 depending on family size and degree type.
Wage Garnishment Is Resuming
The Department of Education confirmed it plans to resume wage garnishment for defaulted borrowers in early 2026. An estimated 10 million borrowers are on track to enter default, more than in the years prior to the pandemic.
Don’t Default: Wage garnishment can take up to 15% of your disposable income. Default also damages your credit, makes you ineligible for future federal aid, and can result in tax refund seizure. If you can’t afford payments, explore alternatives before you miss payments.
Free Tool — Wage Garnishment Calculator: Worried about your paycheck being seized? The free Wage Garnishment Calculator shows exactly how much creditors can legally take in your state — and some states prohibit garnishment entirely. Calculate My Risk →
What You Should Do Now
- Log into StudentAid.gov to check your current repayment plan and loan status
- If you’re on SAVE: You’ll be transitioned to another plan — understand your options before the switch happens
- Compare plans: Use the federal Loan Simulator to compare payments under different plans
- Apply for income-driven repayment if your payments will be unaffordable under the new structure
- Check PSLF eligibility: If you work for a nonprofit or government, Public Service Loan Forgiveness may still apply
- Don’t ignore correspondence from your servicer — critical transition notices are coming
- Don’t pay for “student loan coaching” or “forgiveness assistance” — free federal tools do the same thing
- Don’t default to avoid dealing with it — the consequences are worse than any repayment plan
- Don’t cash out retirement to pay student loans — retirement accounts are often protected in bankruptcy, student loans may be dischargeable in hardship cases
Student loans are math, not morality. If the payments don’t work with your income, that’s a math problem with solutions — not a character flaw.— Steve Rhode
All Your Options: If student loan payments are part of a bigger debt picture, take the Find Your Path quiz. It covers every option — including ones your loan servicer won’t mention.
Key Takeaways
- The SAVE plan is being terminated in early-to-mid 2026 — 7 million borrowers need new plans
- Two new repayment plans (Standard and RAP) take effect July 1, 2026 for new borrowers
- Monthly payments could increase by $2,800–$3,400 annually for many borrowers
- Wage garnishment resumes in early 2026 for defaulted loans
- 10 million borrowers are heading toward default — act now if you’re at risk
- Use free federal tools (StudentAid.gov Loan Simulator) — don’t pay for help you can get free
If you need help with your student loans, checkout Attorney Josh Cohen – The Student Loan Lawyer.
(Sources: U.S. Department of Education | PBS News | NPR | Protect Borrowers)
FAQ
What is happening to the SAVE student loan plan?
The Department of Education is terminating the SAVE plan. No new enrollments are being accepted, and the approximately 7 million current enrollees will be transitioned to alternative repayment plans. Full termination is expected in early-to-mid 2026.
How much will my student loan payments increase?
It depends on your income and loan balance. According to Protect Borrowers, a single person with a bachelor’s degree could pay about $3,400 more per year, while a family of four could see increases of about $2,800 annually. A single borrower earning $50,000 might go from $110/month under SAVE to $210/month under the new RAP plan.
Is the government going to garnish wages for student loans?
Yes. The Department of Education confirmed plans to resume wage garnishment for defaulted borrowers in early 2026. Garnishment can take up to 15% of disposable income. If you’re at risk of default, contact your servicer now to explore income-driven repayment or rehabilitation options.
Should I pay for student loan coaching or help?
No. Free federal tools at StudentAid.gov provide the same information. The Loan Simulator compares all repayment options. PSLF eligibility can be checked for free. Never pay a company to help with student loans when the same resources are available at no cost directly from the Department of Education.
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