Student Loan Landscape Shifts in 2026 as SAVE Plan Ends and New Rules Take Effect

Federal student loan borrowers are navigating a significantly changed landscape in 2026 after courts vacated the SAVE repayment plan, new legislation tightened borrowing limits, and a key tax exemption expired.

The SAVE plan was vacated by federal courts in early 2026 and is no longer available. Borrowers previously enrolled in SAVE are being transitioned to alternative plans. For loans issued on or after July 1, 2026, the primary income-driven option is the new Repayment Assistance Plan, which requires payments of 1% to 10% of adjusted gross income and offers forgiveness after 30 years.

Older plans including PAYE and ICR are being phased out by July 1, 2028. Income-Based Repayment remains available for loans disbursed before July 2026.

New annual and lifetime borrowing limits for graduate, professional, and Parent PLUS loans took effect July 1, 2026. The Grad PLUS loan program has been eliminated for new borrowers after that date. Parent PLUS loans no longer qualify for the new Repayment Assistance Plan and, for loans issued on or after July 1, 2026, do not have a pathway to Public Service Loan Forgiveness.

The federal tax exemption for forgiven student loan debt, established by the American Rescue Plan Act of 2021, expired on December 31, 2025. Forgiveness received through income-driven plans in 2026 or later may be subject to federal income tax, unless the borrower qualifies for the IRS insolvency exclusion. PSLF, death, and disability discharges remain tax-free.

As of the first quarter of 2026, approximately 2.6 million additional borrowers had their loans transferred to the Department of Education's Default Resolution Group. Experts advise borrowers to log into StudentAid.gov to confirm their loan types and current repayment plan status.