The student loan landscape is shifting dramatically in 2025. Between new federal legislation, changing repayment options, and rising demand for private loans, borrowers face more complexity than ever. Here’s a breakdown of the most important updates from federal and private student loan providers and what they mean for your repayment strategy.
Major Federal Student Loan Changes
In July 2025, Congress passed sweeping reforms under the One Big Beautiful Bill Act, overhauling repayment options and loan eligibility. Key changes include:
- New Repayment Assistance Plan (RAP): All existing income-driven repayment (IDR) plans are being phased out for new borrowers. RAP requires payments of up to 10% of income and can stretch repayment terms up to 30 years.
- Loan Caps: Graduate and professional students now face stricter borrowing limits—$20,500 annually and $100,000 lifetime for most graduate programs, with a $200,000 cap for professional degrees.
- End of Grad PLUS Loans: Both House and Senate versions of the bill eliminate Grad PLUS loans, forcing many graduate students to seek private financing.
- Subsidized Loans Preserved (Senate Only): Unlike the House proposal, the Senate’s version keeps subsidized undergraduate loans, softening the impact for low-income students.
Private Lenders Poised to Gain
As federal lending shrinks, private student loan providers are expected to see a surge in demand. Leading companies positioned to benefit include:
- Sallie Mae: Already dominant in graduate and professional lending, Sallie Mae could capture more borrowers as federal PLUS loans disappear.
- College Ave: Offers flexible repayment and coverage of up to 100% of school-certified costs, appealing to students who hit new federal loan caps.
- Ascent: Targets students with little credit or no cosigner, filling a critical gap left by reduced federal access.
- SoFi: Known for competitive refinancing rates and member perks, SoFi is lobbying actively around loan policy changes.
- Abe & Earnest: Stand out for borrower protections and highly customizable repayment terms, which could attract those wary of federal cutbacks.
Interest Rates for 2025–2026
Despite policy changes, federal student loan interest rates are modestly lower for the 2025–2026 school year:
- Undergraduate Direct Loans: 6.39%
- Graduate/Professional Direct Loans: 7.94%
- Parent and Graduate PLUS Loans: 8.94%
Still, rising tuition costs mean more students may need private loans to bridge the gap.
Loan Servicing Transitions
Another challenge for borrowers is ongoing student loan servicer turnover. As contracts shift, many borrowers are being reassigned to new providers. Experts recommend:
- Double-checking that your contact and payment information is up to date.
- Saving statements and payment records, especially if you are pursuing forgiveness.
- Monitoring communications from both old and new servicers to avoid missed payments.
Legal and Oversight Developments
Oversight of the student loan industry is loosening alongside the federal rollback. Navient faces ongoing lawsuits over alleged predatory practices, while SoFi and others lobby for more favorable lending conditions. Borrowers entering the private loan market may face fewer consumer protections than in federal programs.
Bottom Line for Borrowers
With federal repayment options consolidating and borrowing caps tightening, private student loans will play a bigger role in higher education financing. Borrowers should:
- Stay informed about servicer changes and repayment plan transitions.
- Compare private lenders carefully, weighing protections, rates, and repayment flexibility.
- Seek professional guidance to align borrowing strategies with long-term financial goals.
With new rules and fewer federal protections, the right plan matters more than ever. Talk to a Student Loan Professor advisor and make sure you’re on the best path forward.
Brandon Barfield is the President and Co-Founder of Student Loan Professor, and is nationally known as student loan expert for graduate health professions. Since 2011, Brandon has given hundreds of loan repayment presentations for schools, hospitals, and medical conferences across the country. With his diverse background in financial aid, financial planning and student loan advisory, Brandon has a broad understanding of the intricacies surrounding student loans, loan repayment strategies, and how they should be considered when graduates make other financial decisions.
