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Student loan forgiveness 2026; Only 2 repayment options available

US Street Talk News Desk December 13, 2025
7 min read
Student loan forgiveness 2026
Student loan forgiveness 2026 student loan news

New York, 13 December 2025, student loan forgiveness : Student loans in America are a big problem. Millions of students take out loans for college every year, and it takes an average of 20 years to pay them back. In 2025, the Biden administration rolled out several plans for student loan forgiveness and repayment options, but big changes are likely in 2026. Specifically, there was an announcement that the ‘Saving on a Valuable Education’ (SAVE) plan will end, and the new ‘One Big Beautiful Bill Act’ (OBBBA) will change repayment options and forgiveness rules. In this article, we’ll take a detailed look at student loan forgiveness, repayment options, rules, features, and US government policy for 2026.

Current review of student loan forgiveness programs

The U.S. Department of Education has run several forgiveness programs. These programs vary depending on borrowers’ income, job, and type of service. The main programs are as follows:

1. Public Service Loan Forgiveness (PSLF)

  • Features: If you’ve worked full-time for at least 10 years in the public sector (government, non-profit organizations), the remaining loan gets forgiven.
  • Rules: Applicable for federal direct loans. You need to make 120 payments every year. Apply using the PSLF tracker.
  • Changes for 2026: From 1 July 2026, PSLF rules will take effect, but there aren’t many changes to the programe. Borrowers will get 3 years of credit.
  • Eligibility: 3.6 million borrowers got payment credit adjustment in 2024-2025.

2. Income-Driven Repayment (IDR) Forgiveness

  • Features: Monthly payments decrease according to income. After 20 or 25 years (depending on the type of loan), the remaining amount is waived.
  • Rule: Under plans like SAVE, PAYE, IBR. No tax is charged on the forgiven amount until 2025, but after 1 January 2026 the forgiven amount will be taxable.
  • For 2026: Changes are happening in IDR schemes (details below).

3. Teacher loan forgiveness

  • Features: Up to $17,500 waiver if taught in school for 5 years.
  • Rule: Work is necessary in schools with low income.

4. Total and disability discharge

  • Features: If you can’t work due to disability, the entire loan is waived.
  • Rule: Doctor’s certificate required.

5. Others

Special forgiveness for nurses, firefighters, law enforcers. The Biden administration granted forgiveness in 2025 for Pell Grant recipients up to $20,000.

Repayment Options

In the US, there are many plans to pay off student loans. Main options by 2025:

1. Standard Repayment Plan

  • Features: Same monthly payments for 10 years.
  • Rule: The total amount doesn’t increase with interest.

2. Income-driven repayment (IDR) plans

  • SAVE Plan: The most popular in the Biden era. Payments up to 5% of income. Forgiveness for undergraduate loans in 10 years. Affects 7 million borrowers.
  • PAYE (Pay As You Earn): Up to 10% of income, forgiven over 20 years.
  • IBR (Income-Based Repayment): For old borrowers, 15-25% of income.
  • REPAYE: The predecessor of SAVE.
  • Changes for 2026: The SAVE plan is ending. From 1 July 2026, the ‘Repayment Assistance Plan’ (RAP) will start. RAP will be a new IDR plan with income-based payments and forgiveness in 20-25 years. IBR, PAYE, SAVE will be closed for new loans; only RAP will be available. Borrowers in SAVE will be moved to other IDRs, but monthly payments might increase (45% of borrowers will be affected).

3. Extended/Graduated Plan

Features: Lower payments for 25 years, but interest increases.

4. For parent plus loans

After 2026: $20,000 per student/year, $65,000 lifetime cap. IDR not available for new loans.

Borrowers under SAVE will get forbearance until 2026, but after that, they will have to choose a new plan.

Rules and features for 2026

  • Forgiveness rules: IDR forgiveness after 20 years (undergraduate) or 25 years (graduate) of payments. 10 years for PSLF. Amount forgiven is taxable after 2026.
  • Payment credit: Adjustments made in 2024-2025; got a 3-year credit.
  • Agreement: A deal with the state of Missouri to shut down SAVE. The Trump administration pushed this forward.
  • Court decision: In December 2025, the court rejected a delay in the pardon process.

US government policy plan for 2026

The OBBBA law has changed the student loan policy (Republican-made):

Key changes:

  • SAVE, PAYE, IBR closed; RAP and standard plan started.
  • RAP available from 1 July 2026: income-based payment, waiver facility.
  • Parent plus loan limit
  • PSLF will remain stable, but taxes will increase in IDR.

Purpose: Reduce loan forgiveness, increase repayment. Biden era $10,000-$
Impact: 7 million SAVE borrowers will have to choose a new plan. SAVE will completely end by 2028.

Advice for borrowers

  • Immediate steps: log in to studentaid.gov and check the PSLF tracker. If you’re in SAVE, switch to IBR or PAYE.
  • 2026 prep: Learn about RAP. Talk to a tax advisor and think about forgiveness.
  • Help: Contact the Federal Student Aid Helpline (1-800-433-3243).

2026 will be a year of change for student borrowers. Government policies are influenced by political shifts, so keep checking official websites. Time will tell whether these changes will give borrowers financial stability or increase stress.

Detailed information about the Public Service Loan Forgiveness (PSLF) scheme

The Public Service Loan Forgiveness (PSLF) in the US is an important student loan forgiveness program. It started in 2007 and allows borrowers working in the public sector to have their remaining loans forgiven after completing 10 years (120 payments). This forgiveness is tax-free. As of now (December 2025), millions of borrowers have benefited from it, but some changes are coming in 2026.

Eligibility Criteria

The following conditions need to be met for PSLF:

  • Loan type: Only Federal Direct Loans (Direct Subsidized, Unsubsidized, PLUS, Consolidation Loans) are eligible. If you have FFEL or Perkins loans, you need to convert them into a Direct Consolidation loan.
  • Job: Full-time work in the public service sector. Full-time means at least 30 hours a week (combined across one or more employers).
  • Payments: 120 valid monthly payments (they don’t have to be consecutive).
  • Repayment plan: Income-driven repayment (IDR) plans (like IBR, PAYE, ICR, SAVE – even though SAVE is ending) or the 10-year standard repayment plan.
  • Employer: Should be a qualifying employer. Eligibility is based on the employer, not the type of job.

Eligible employers

  • US government agencies (federal, state, local, tribal, military).
  • 501(c)(3) tax-exempt non-profit organization
  • Other non-profit organizations that mainly provide public services like education, health, security.
  • Full-time volunteer service in AmeriCorps or Peace Corps

Incompetent employer

  • For-profit organization
  • Labour unions, political parties

Important change for 2026 (effective from 1 July 2026):

According to the new rules, the Department of Education can deem employers ineligible if they have been involved in illegal activities with a “substantial illegal purpose” (e.g., illegal immigration, certain medical procedures, etc.).

  • These changes are based on the Trump administration’s executive order.
  • Only applicable to activities after 1 July 2026. Payments made before that will remain safe.
  • The department said that probably fewer than 10 employers will be disqualified each year.
  • Payments made to ineligible employers (after becoming ineligible) will not count towards PSLF.

Definition of full-time work

  • Average 30 hours a week
  • For teachers: based on a minimum 8-month contract.
  • For adjunct professor: calculate contact hours × 3.35.

Time is counted for religious activities in religious institutions.

Proper payments

  • Payment in full, on time, under the right plan.
  • $0 payments are made if the income is low.
  • Payments aren’t counted in some deferments/forbearances, but there’s a new ‘Buyback’ feature: you can buy months of ineligible forbearances/deferments to get credit (only if 120 months of work are completed).
  • The months during the COVID pause are counted.

New repayment plan and PSLF

A new Repayment Assistance Plan (RAP) will start in 2026. Payments made under this will count towards PSLF.

Application Process

  • Use the PSLF Help Tool (studentaid.gov/pslf).
  • Submit the Employment Certification Form every year or when you change jobs. This helps keep track of your payment count.
  • Submit the final form after completing 120 payments. The employer needs to sign.
  • Log in to studentaid.gov to check your progress.
  • MOHELA is the main servicer for PSLF.

Other features and rules

  • Tax-free.
  • For Parent PLUS loans: Consolidation required for IDR.
  • If consolidation is done, the payment count is measured by weighted average (adjustment available in some cases).
  • TEPSLF (Temporary Expanded PSLF) was an extra perk for old plans, now limited.

Advice for borrowers (2025-2026)

  • Submit the Employment Certification now and track the progress.
  • Consider consolidation or changing the plan before 2026.
  • For official information, check studentaid.gov/pslf. The plans are as they were until changes take effect.
  • If the employer becomes ineligible, only future payments will be affected.

The PSLF scheme is a big help for public service workers (teachers, doctors, police, military, etc.). Even though the changes in 2026 are limited, keep checking for official updates. If you have any doubts, contact the Federal Student Aid helpline (1-800-433-3243).