Student Loan Updates for May 2025

Student Loan Disruption, Legislative Proposals, and a Word for the Class of 2025

If you’re feeling like the student loan world is shifting beneath your feet, you’re not wrong. With new proposals from Congress, headlines about loan collections, and looming changes to tax benefits, May is delivering a lot of turbulence.

As always, we’re here to help you cut through the noise, break down what matters, and guide you toward smart decisions, no matter where you are in your repayment journey.

GOP Budget Proposal: A Shakeup Like We’ve Never Seen

Our lead story this month – by a long shot – is the House GOP’s budget proposal. It includes the most disruptive student loan reforms we’ve seen in over a decade. As someone who’s worked in this industry for 15+ years, I can honestly say this proposal represents a total reimagining of the federal student loan system, both from how you borrow to how you repay.

Here are the key highlights:

• Graduate borrowing is capped at $150,000. This obviously represents a huge conundrum for those looking to enter health professional programs which can easily surpass $300k cost of attendance.
• Subsidized and Grad Plus loans would be completely eliminated.
• Parent PLUS borrowing capped at $50,000 per parent.
• Loan repayment options would be limited to just two options:
• A new “standard” plan based on loan balance.
• A new IDR Plan called RAP, which has a number of different features that some borrowers will love while others will hate.
• Future medical residents would lose PSLF eligibility during training (but gain interest subsidies for up to four years).

Click here to read our detailed summary.

Let us be clear: this is still a proposal. The Senate Education Committee still has to present their proposals, and we’re hearing that they’re not eager to flip the student loan system upside down. But the changes are dramatic enough that we want you to be aware and prepared. We expect more developments this summer, and we’ll keep you informed.

SAVE Forbearance, Repayment Status Confusion & Collections Begin

You’ve probably seen the headlines: the government has begun referring past-due borrowers to collections, and wages are being garnished in some cases. This is a shift we hoped wouldn’t happen so soon. Unfortunately, many of these defaults are likely driven by confusion, not intentional nonpayment.

Here’s what we’re seeing:

• Some borrowers are unsure if they’re still in SAVE forbearance.
• Others have received notices that their forbearance is ending.
• Loan statuses appearing incorrect on servicer websites
• Payments are coming due before processing of IDR applications, or the status of applications is uncertain.

This is why we strongly recommend that everyone logs in to their loan servicer’s website monthly. Check the payment status for each of your loans (including the due dates), and if something looks wrong, immediately contact your loan servicer.

Taxes & Student Loans: What’s on the Chopping Block?

In order to fund key tax cuts, the Trump administration has tasked Congress with finding major offsets. This could mean cutting benefits for student loan borrowers.

Here’s what’s on the line:

• The student loan interest deduction (currently up to $2,500/year) may be eliminated.
• Tax-free student loan forgiveness, enacted during COVID, is set to expire at the end of this year. PSLF would still be tax-free.

And so far, there’s no indication that Congress plans to extend those protections.

Translation? If you’re expecting loan forgiveness (especially through an IDR plan) now is the time to understand the potential tax implications and how they could affect your financial future. Schedule a personal consultation to help ensure your loan repayment strategy is still on track.

To the Class of 2025: Our Hats Off to You!

To all our 2025 graduates: congratulations! This is a massive achievement, and we’re celebrating right alongside you.

That said, you’re entering repayment during a time of major uncertainty. No one can predict exactly what loan options will be available a year from now. But what you can control is how you prepare today.

This is your chance to:

• Explore your repayment options while they’re still on the table
• Build a personalized plan based on your career, income, and goals
• Enter repayment with confidence, not confusion

Whether you’re a new grad or a seasoned professional, Student Loan Professor is here to help you navigate the changes, forecast your options, and get a clear strategy in place.

Let’s Talk Strategy

If you’re unsure what any of the above changes means for you, please reach out. These policy shifts are complex, and it’s more important than ever to make informed choices.

Book a consultation with a Student Loan Professor advisor and get real answers tailored to your unique situation.

Click here to schedule your one-on-one session.

We’ll help you turn uncertainty into clarity, so you can step into your future with confidence.