Times are changing for federal student loan borrowers. The elimination of many of the Biden administration’s debt relief programs, paired with sweeping proposed changes under the Student Success and Taxpayer Savings Plan, could create a significant impact on consumers—and their wallets—in the coming year and beyond.
Collections resume on defaulted federal student loans
The federal government officially resumed collections on defaulted student loans on May 5, 2025. This marks the first time since March 2020, after numerous initiatives delayed required payments or prevented federal student loans from being turned over to collections.
Now, those programs have run out—just as hopes of widespread federal loan forgiveness have all but disappeared. Borrowers who do not repay their debts could face wage garnishments, tax refund offsets, and even Social Security benefit reductions in the future.
This change in direction regarding forgiveness of federal loans could also signal opportunity for refinance. Borrowers who have been hanging on to their federal student loans in hopes of forgiveness may now be much more willing to consider refinance to save money and simplify their finances.
Could PLUS changes equal opportunity?
Republicans in the House Education Committee have announced plans to streamline income-based repayment plans and revamp PLUS loans (for both parents and grad students), both of which could have significant impact on the bigger student loan picture.
The Biden administration’s SAVE plan greatly reduced or even eliminated federal student loan payments for millions of federal student loan borrowers, but has been effectively stopped by court injunctions. The proposed legislation will favor a single income-based repayment plan, the Repayment Assistance Plan (RAP). For those previously enrolled in SAVE, student loan payments will increase significantly when moving to a new plan.
Potential changes to the PLUS program, such as eliminating PLUS for grad students and imposing strict limits on parent PLUS borrowing, could shift some borrowing by graduate and professional students, as well as parents, to private student loan programs.
A new day for private student lenders
As families wait to see how changes to federal student loan programs will shake out, credit unions have an opportunity to be part of the solution by offering affordable private student loan and refinance options.
For those struggling to find ways to pay for college, credit unions can provide a fair-value private student loan to cover expenses. Private student loans were designed to fill the gap that is left after a family’s savings, scholarships and federal financial aid have been exhausted. With competitive rates and a variety of repayment options, private student loans from credit unions offer an affordable option to help cover costs.
Additionally, Student Choice’s flagship education line of credit provides peace of mind with a single application and no need to reapply each year—borrowers simply place a draw request from their line for future needs. This unique structure is reassuring for families who have been caught up in the whirlwind of changes from the federal government in recent years.
For borrowers facing a drastic increase in their monthly payments, refinancing their loans with a credit union could result in significant savings each month and over the life of their loan. Last year’s interest rate reductions and the possible elimination of some federal repayment plans could make private student loan refinance more appealing than ever.
This is why credit unions exist—to effectively serve members’ financial needs. And, as not-for-profit cooperatives, our industry has the ability to be there for members when they need us most.
CU Student Choice offers one-of-a-kind solutions, including a private education line of credit that offers tremendous convenience to borrowers and is truly unique in the marketplace. With no implementation fees or need for additional credit union staffing, the Student Choice student lending program offers a low lift for a high return. Contact us to learn more about how Student Choice can make it simple to offer customized student lending solutions that benefit your current and future members.
