As we kick off 2026, one thing is undeniable: change in the federal student lending landscape isn’t “coming soon”—it is already here. With seismic shifts in federal policy, credit unions have a unique opportunity and responsibility to help members navigate uncertainty and fill critical gaps in education financing.
Federal student lending in transition
The One Big Beautiful Bill (OBBB) Act was already poised to eliminate Grad PLUS loans and place new caps on Parent PLUS loans starting this July for new borrowers. These changes, coupled with streamlined repayment plans, mark the most notable changes in federal student loans in decades.
Now, the federal government’s Saving on a Valuable Education (SAVE) repayment plan—touted as the most affordable income-driven repayment option available—is being sunsetted after legal and political challenges. As part of a Dec. 9th settlement between the U.S. Department of Education and several states, the SAVE plan will no longer enroll new borrowers, and existing enrollees must transition into other repayment options. (The decision is pending court approval as of this writing, but the Department of Education is encouraging SAVE borrowers to explore other repayment options.)
This development marks a departure from previous policy announced with the OBBB that allowed borrowers to stay in SAVE until 2028. Millions of borrowers now face the prospect of reevaluating their repayment strategies—and in many cases, will encounter higher monthly payments than they anticipated under the SAVE framework.
Additionally, ED has announced it will be instituting wage garnishments and tax refund seizure for the 5.3 million borrowers currently in default for the first time since 2019.
Credit unions: Stepping up where members need you
Due to shifting repayment structures and the elimination and/or capping of popular PLUS programs, families are feeling the pressure of rising education costs and fewer federal funding options. That environment creates a clear opening for credit unions to step in and serve.
Amid reduced federal support, credit unions are positioned to help members by offering private student lending solutions that are fair, flexible, and aligned with members’ financial goals. These private solutions—such as education lines of credit with competitive terms and flexible repayment options—allow credit unions to:
- Support members who face a shortage of federal borrowing options, especially for career training, graduate programs, or late funding needs.
- Deliver personalized guidance on comparing repayment strategies and managing education debt.
- Deepen long-term relationships by providing financial education and guidance during major life transitions.
Unlike larger financial institutions and online fin-techs, credit unions can tailor offerings to member needs, emphasizing education and transparency over product complexity or hidden fees.
Action steps for credit unions in 2026
As the new year unfolds, credit unions should take proactive steps to support members through this shift:
- Educate members early and often: Provide clear, digestible resources on federal repayment changes, potential impacts on loan costs, and how private credit union options may serve as part of a strategic funding plan.
- Build or expand student lending products: Whether launching private student lines of credit or refinancing solutions, having options ready before peak college decision and tuition deadlines ensures you are top of mind for members.
- Communicate the credit union difference: Remind members that credit unions exist to serve their members—and that mission-driven support is especially valuable during periods of federal policy volatility.
The bottom line: Be there for members
If 2025 taught us anything, it’s that federal student loan policy can shift rapidly—sometimes leaving borrowers without clear direction. When members need support most, credit unions consistently answer the call—and the current environment is a prime opportunity.
By rising to meet these challenges, credit unions will not only help members achieve their educational goals but also reinforce the cooperative difference in action. In addition to our unique education line of credit and refinance offerings, Student Choice is deploying new solutions to help credit unions serve members’ needs in the coming year and beyond.
Connect with us today to explore how your credit union can launch or grow education lending, engage new borrowers, and reinforce your role as a trusted financial partner.
