Student Loan Forgiveness: What To Know Ahead of 2025

Commitment to Our Readers

GOBankingRates’ editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services – our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.

20 Years
Helping You Live Richer

Bạn đang xem: Student Loan Forgiveness: What To Know Ahead of 2025

Trusted by
Millions of Readers

Student loan forgiveness is up in the air heading into 2025.

A federal court recently blocked parts of the Biden administration’s SAVE plan, which had promised advantages such as more generous repayment terms and faster loan forgiveness for certain borrowers. The decision has forced the Education Department to pause income-driven repayment processing, which leaves affected borrowers in limbo.

Also, with the Trump administration about to enter office, forecasts are weak for a favorable resolution for those hoping to have their loans zeroed out. 

Here’s what to know about student loan forgiveness for 2025. 

Student Loan Forgiveness Under SAVE and Other IDR Plans

Borrowers who are hoping for loan forgiveness through SAVE or older IDR plans, including Income-Contingent Repayment and Pay As You Earn, are facing delays due to recent litigation.

Xem thêm : Bank Loan Spreads Offer Dynamic Opportunities

Due to a legal challenge by a group of Republican-led states, the 8th Circuit ordered the Department of Education to stop implementing the SAVE plan in August, blocking student loan forgiveness for those enrolled in the plan. Additionally, according to the 8th Circuit, student loan forgiveness under other IDR plans — ICR and PAYE — that were created using the same legal authority could also get struck down.

As of now, however, no final decision has been made on student loan forgiveness for borrowers in any of the aforementioned IDR plans.

The Education Department is struggling to make progress with other forgiveness initiatives, too, including the IDR account adjustment, which was designed to fix past issues and credit borrowers for payments that weren’t previously counted toward forgiveness. Some of these adjustments have already been approved, but there are plenty of borrowers still waiting for their just due.

Student Loan Forgiveness in 2025

According to Robert R. Johnson, Ph.D. and professor of finance at Creighton University, borrowers shouldn’t expect major changes.

“There is little, if any, political appetite for student loan forgiveness in the incoming Trump administration,” Johnson said.

He added that borrowers should not expect any changes and prepare to keep making their payments. 

How Interest Rate Cuts Affect Student Loans

According to Johnson, borrowers with floating-rate student loans may see some relief in 2025. 

“Student loan interest rates are tied to broader market rates, and the outlook over the near term is for lower interest rates throughout the capital markets,” he said.

Note that floating interest rates apply only to private student loans. Federal student loans have fixed rates and will not be affected by interest rate cuts. 

Johnson explained that the CME Group’s FedWatch Tool estimates a 65% chance that the federal funds rate will drop by at least 75 basis points by the end of 2025 and a 30% chance of a 100 basis-point decline. Johnson noted, however, that any inflation caused by proposed Trump tax cuts or tariffs could cause the Fed to take a slower approach to rate cuts.

Overall, borrowers with floating-rate loans — aka private student loans — can likely anticipate a drop in interest rates, he said. 

Preparing for 2025 as a Student Loan Borrower

Keep making payments as required to stay in good standing regarding student loans. 

Borrowers can still apply for the SAVE Plan but will be placed in forbearance, and forgiveness under these options is on hold, according to the Federal Student Aid website. Depending on the outcome of the litigation, borrowers enrolled in SAVE may or may not be eligible for forgiveness. Additionally, new enrollments in Pay As You Earn and Income-Contingent Repayment plans are not allowed, except for parent borrowers who consolidated PLUS loans.

To stay updated, check the Federal Student Aid’s website periodically.