Student Loan Repayments: Navigating the Return Under New Federal Rules
As September begins, many borrowers face an important financial milestone: the end of federal grace periods and the start of a new repayment cycle under updated student loan rules. With recent legal and policy changes reshaping repayment options, this fall is the first time many graduates and families are experiencing the system under a revised framework.
- Interest Resumes, Forgiveness Plans Altered: After years of pandemic-era relief and temporary adjustments, interest is once again accruing for many borrowers.[1] Recent court rulings and Department of Education updates have also changed the availability of certain repayment programs, including income-driven plans like SAVE. Borrowers are now being encouraged to evaluate alternatives such as the Income-Based Repayment (IBR) plan or a standard repayment schedule to ensure their payments remain manageable.[2]
- Fewer Long-Term Options, New Repayment Pathways: In response to program changes, the Department of Education has confirmed that some repayment plans are being phased out or consolidated. Over the coming year, many borrowers will be transitioned into a smaller set of available options, including traditional repayment schedules and a new Repayment Assistance Plan (RAP) expected in 2026. While this streamlining may simplify choices, it also means that proactive planning is more important than ever to avoid being caught off guard.[3]
- What Borrowers Can Do Now:
-
- Review Your Loan Type and Status: Different loans have different rules. Federal loans may qualify for repayment flexibility, while private loans follow different standards. Use the federal Loan Simulator tool to check which options fit your situation.[4]
-
- Update Your Repayment Strategy: Some borrowers may want to accelerate repayment before interest builds, while others may prioritize minimizing their monthly obligation to free up cash flow. Your Wedbush financial advisor can help balance repayment with other priorities like saving and investing.
-
- Keep Taxes in Mind: Up to $2,500 of student loan interest can still be deducted on federal tax returns, subject to income limits. In addition, some repayment plans base obligations on adjusted gross income (AGI), so smart tax planning can have a direct effect on monthly payments.[5]
-
- Stay Alert to Future Adjustments: With repayment options narrowing in the next year, borrowers should expect additional changes ahead. Planning now while programs are still shifting will help avoid surprises when new rules take effect.
While student loan rules continue to evolve, clarity on repayment strategies today can prevent financial stress tomorrow.
If you or someone in your family is resuming student loan payments, your Wedbush Financial Advisor can help evaluate the best repayment strategy so you can stay on track with your broader financial goals.
Sources:
[1] https://studentaid.gov/announcements-events/covid-19
[2] https://studentaid.gov/announcements-events/idr-court-actions
[4] https://studentaid.gov/loan-simulator/
[5] https://www.irs.gov/taxtopics/tc456
Disclosure
Wedbush Securities does not provide tax or legal advice. Please consult your tax or legal advisor.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. The information presented here is not specific to any individual’s personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. The information in these materials may change at any time and without notice.
Third-party entities, companies, and organizations that may be referenced on this page are not affiliated with Wedbush Securities or any of its affiliates. Opinions mentioned are that of the third-party and not of Wedbush Securities, the financial adviser and/registered representative, or any of our affiliates.
Investment products involve investment risks including potential loss and are not insured by any federal agency, are not deposits or obligations of, or guaranteed by any financial institution and may involve loss of value. Past performance is not a guarantee of future returns. Any implementation of recommendations or investment strategies may generate fees, expenses, charges or commissions, based on the products and services. Any organization, company, individual, or third-party entity that are referenced on this page are not affiliated with Wedbush or any of its affiliates. The content on this page might not necessarily reflect the expertise of the investment professional and should be used for informational purposes only; the information provided on this page is not intended to be used as a recommendation of any kind, as it does not constitute an offer or advice.
Fixed income securities are subject to increased loss of principal during periods of rising interest rates and are subject to various other risks including changes in credit quality, market valuations, liquidity, prepayments, early redemption, corporate events, tax ramifications, and other factors. Investors should consider carefully information contained in the prospectus, including investment objectives, risks, charges, and expenses. You can request a prospectus by contacting your Wedbush Financial Advisor and/or Registered Representative.
Securities and Investment Advisory services are offered through Wedbush Securities, Inc. Member NYSE/ FINRA / SIPC