Student Loans Archives

Student Loan Update 2026: What Borrowers Need to Know

In the ever-shifting landscape of federal student loans, staying informed is the best way to protect your financial health. Recently, The Institute for College Access & Success (TICAS) released an updated guide, “The Latest Student Loan News: What Borrowers Need to Know,” detailing major changes coming from the U.S. Department of Education.

From the end of the SAVE plan to a temporary pause on wage garnishment, here is everything you need to know about the current state of student loans.

1. The Official Sunsetting of the SAVE Plan

Perhaps the biggest news for millions of borrowers is the official end of the Saving on a Valuable Education (SAVE) plan. Following a court settlement in late 2025, the Department of Education (ED) announced it will no longer enroll new borrowers in SAVE.

Current Borrowers: If you are currently enrolled, expect to be moved into a different repayment plan (such as IBR or the new RAP) in the coming months.
What to do: Log in to your StudentAid.gov account to check your status. The ED and loan servicers are currently reaching out to impacted borrowers with transition guidance.

2. Temporary Reprieve: Pause on Wage Garnishment

In January 2026, a temporary pause was announced on forced collections for defaulted federal student loans. This includes:

Wage garnishment
Seizure of federal tax refunds
Social Security benefit offsets

This pause is intended to give borrowers in default a “fighting chance” to return to good standing before the new Working Families Tax Cuts Act reforms take full effect.

Pro Tip: If you are in default, use this window to consolidate your loans or enter a rehabilitation program immediately. A new “second chance” rule now allows borrowers to rehabilitate a loan for a second time if they’ve defaulted again.

3. Major Changes to Income-Driven Repayment (IDR)

The rules for accessing repayment plans are changing significantly based on your loan disbursement date:

Existing Borrowers (Loans before July 1, 2026)

You will generally retain access to existing income-driven plans like Income-Based Repayment (IBR). Note that IBR rules have been simplified, and you may no longer need to prove “partial financial hardship” to qualify.

New Borrowers (Loans after July 1, 2026)

Options will be more limited. Many new borrowers will be placed into a Standard Repayment Plan based on their loan amount unless they proactively select the new assistance plan.

The New “Repayment Assistance Plan” (RAP)

Expected to launch in July 2026, RAP will set payments between 1% and 10% of your income. While it offers interest subsidies to prevent balance growth, it requires 30 years of payments before loans are forgiven—a longer timeline than previous plans.

4. The Return of the “Tax Bomb”

Borrowers should be prepared for a significant tax change. As of January 1, 2026, debt discharged under IDR plans is once again considered taxable income. The pandemic-era waiver has expired. If you are nearing your 20- or 25-year forgiveness mark, consult a tax professional to plan for the potential IRS bill.

5. Public Service Loan Forgiveness (PSLF) Eligibility

Public service workers must monitor new regulations effective July 1, 2026. New rules allow the Secretary of Education to disqualify employers deemed to have a “substantial illegal purpose.” * This rule is currently being contested in court.

Verify your employer’s status regularly on the PSLF Employer Search tool to ensure your monthly payments continue to count.

How to Take Action Now

The student loan system is in a period of high volatility. To ensure you don’t fall through the cracks, TICAS recommends the following:

Confirm Your Servicer: Many contracts have changed hands. Ensure your contact information is current so you don’t miss transition notices.
Use the Loan Simulator: The tool at StudentAid.gov will help you evaluate your repayment options.
Consolidate Parent PLUS Loans: To access better repayment options, you must consolidate Parent PLUS loans into a Direct Consolidation Loan before July 1, 2026 (we recommend completing this application no later than April, 2026)
Get Expert Guidance: If you’re feeling overwhelmed, reach out to a certified credit counselor for a free session to manage your budget and build a repayment plan.

The Bottom Line: Don’t wait for your servicer to call you. With SAVE disappearing and the tax waiver expired, the choices you make in early 2026 will define your financial trajectory for years to come.

Contact Parachute to schedule a FREE student loan counseling session to develop a personalized plan: https://parachutecreditcounseling.org/services/credit-budget-counseling/#student-loan-counseling

Parachute Services, Student Loans

Federal Student Loan Collections Have Resumed – Act Now!

This is an important update regarding federal student loans. The pause on collections for defaulted federal student loans has ended.

What’s Happening Now:

Effective Monday, May 5, 2025, the U.S. Department of Education’s Office of Federal Student Aid (FSA) resumed collecting on defaulted federal student loans. This impacts over 5 million borrowers.

Treasury Offset Program: The government can now withhold federal payments, including tax refunds and Social Security benefits, if you have defaulted student loans.
Administrative Wage Garnishment: Later this summer, administrative wage garnishment will resume, allowing up to 15% of your disposable income to be withheld.

If You’re in Default – Act Immediately!

The FSA is urging all borrowers in default to take immediate action to avoid these involuntary collection measures. You should receive an email from FSA in the next two weeks with details on how to contact the Default Resolution Group. They can help you explore options like:

Setting up a monthly payment plan.
Enrolling in an income-driven repayment (IDR) plan.
Signing up for a loan rehabilitation program to get your loan back in good standing.

How Parachute Can Help (NY Residents):

For New York residents, Parachute offers free, confidential student loan counseling. Our counselors can help you understand your options, navigate the repayment process, and develop a plan to manage your student loan debt, especially if you’re in default. Contact us at (800) 926-9685 to schedule a session.

For those in other states, please visit StudentAid.gov for information on repayment options. You can also search for a local non-profit organization in your region that provides student loan counseling, such as those affiliated with the National Foundation for Credit Counseling (NFCC).

Taking proactive steps now can help you avoid serious financial consequences.

Parachute Services, Student Loans

Student Loan Delinquencies Surge, Threatening Credit Scores and Financial Stability

A new report from the Federal Reserve Bank of New York’s Center for Microeconomic Data reveals a sharp increase in student loan delinquencies, raising concerns about the financial health of millions of borrowers.

The report, which includes data updated through the first quarter of 2025, shows that after a five-year pause, student loan delinquency rates have returned to pre-pandemic levels. Nearly one in four borrowers (23.7%) with a payment due are now behind on their student loans. This surge is attributed to the expiration of pandemic-era protections that temporarily halted loan payments and reporting of delinquencies to credit bureaus.

The consequences of this rise in delinquencies are significant. The report highlights that borrowers who have become newly delinquent are experiencing substantial declines in their credit standing. Over 2.2 million borrowers saw their credit scores drop by more than 100 points, and over one million saw decreases of at least 150 points. This credit score damage will lead to:

Higher borrowing costs for future loans (auto, mortgage, etc.)
Difficulty obtaining new credit cards
Challenges securing housing and employment

The findings underscore the vulnerability of borrowers, particularly those over 40 and those with already subprime credit scores, who now face increased financial hardship due to these delinquencies.

“The resumption of federal student loan collections marks a significant and potentially destabilizing event for millions of borrowers who have already faced economic hardship. The end of this long-standing pause demands immediate attention and action from borrowers to understand their repayment options and avoid the severe consequences of default, including wage garnishment and the withholding of essential federal benefits,” says Noelle Carter, President & CEO of Parachute Credit Counseling.

For those facing student loan challenges, Parachute Credit Counseling offers free, confidential support. Our experienced counselors advocate for borrowers, helping them understand their options with the Default Resolution Group and assisting them in choosing the path that aligns with their best interests. For more information, borrowers can call 716-712-2060 or visit https://parachutecreditcounseling.org/.

Student Loans

From Chaos to Clarity: A Live Briefing for Student Loan Borrowers

We are excited to invite you to a FREE student loan webinar in collaboration with Education Debt Consumer Assistance Program (edcap) on Thursday, May 22, 2025 at 12:00PM ET!

Get the latest updates and expert advive to help you manage and eliminate your student loan debt. Plus, a live Q&A with student loan experts!

Together, we’ll go over:

An overview of student loan repayment options.
How Income-Driven Repayment (IDR) plans work.
Steps to qualify for Public Service Loan Forgiveness (PSLF).
Other forms of federal student loan relief.
The newest changes and developments in the federal loan system.

If you’re in need of one-on-one advice and guidance regarding your student loan situation, Parachute is your resource for free student loan counseling https://parachutecreditcounseling.org/services/credit-budget-counseling/#student-loan-counseling Call us today! 716-712-2060

Student Loans, Uncategorized

Married with Student Loans? Choosing the Right Tax Filing Status is Critical

Navigating student loans is tough, especially when you’re married! One critical decision impacting your finances is your tax-filing status. Are you filing jointly or separately? Choosing incorrectly could mean missing out on valuable deductions like the student loan interest deduction or you could impact your eligibility for income-driven repayment plans, potentially costing you hundreds or even thousands of dollars.

EDCAP (Educational Debt Consumer Assistance Program), a program of the Community Service Society of New York, is hosting a FREE webinar to help you understand this crucial decision: Married and Managing Student Loans? Learn How to Optimize Your Tax Filing Status.

Join them February 18 at 6:00 PM EST as they explain the financial and tax implications of filing jointly vs. separately for married couples with student loans.

Learn more about EDCAP:

EDCAP is a program of the Community Service Society of New York, dedicated to providing free, unbiased counseling and resources to student loan borrowers.

Visit edcapny.org to learn more.

Please share with those who might benefit! We look forward to seeing you there!

Debt, Parachute Services, Student Loans

Valiant Battle to Achieve Student Loan Repayment Assistance Despite Persistent, Ongoing Attempts to Squash It

Latest News: August 2024 Financial Update

Parachute Credit Counseling Offers FREE Student Loan Counseling

While June brought good news for student loan repayment when a federal judge gave a largely favorable ruling to a resoundingly political move where 11 states filed lawsuits to halt repayment assistance for student loans—the most recent news is unfortunately less optimistic.

This week, President Biden was forced to formally file an appeal with the Supreme Court, asking the justices to step in and reverse the most recent federal court order challenging his SAVE plan which is his $156 billion student loan debt forgiveness plan that he has spent several years refining.

The president is hoping to reverse the most recent action which negatively impacts not only the eight million Americans enrolled in the SAVE plan, but other borrowers pursuing loan forgiveness and reduced payments under separate programs that aren’t even subject to the current legal challenges.

Student Loans have been a major issue these past ten years, with national student loan debt totaling over $1.7 trillion. An entire generation of young people have been drowning as college costs rose exponentially—as did all living expenses—while salaries have not kept pace. Tens of thousands of local residents grapple with student loan repayment, financially and even more so, in understanding its many rules and complexities as well as its ever changing status. Parachute Credit Counseling, formerly known as Consumer Credit Counseling Service of Buffalo (CCCS), is the only organization in the Western New York region to offer free student loan counseling. Parachute strongly supports repayment assistance like the recently launched SAVE plan.

Under the SAVE plan, 8 million people are eligible for lower payments or potentially full debt forgiveness. The repayment plan calculates monthly loan payments based on income and family size as well as discretionary income. It has lowered the monthly repayment amounts for millions. Around half of the eligible borrowers saw their monthly payments drop to zero if they make/made under $16 an hour.

At present time, in response to the federal appeals court order, the Biden administration has placed more than eight million borrowers into an administrative forbearance. No payments are due during the forbearance period and no interest will accrue, but the forbearance will not count toward student loan forgiveness, including under Public Service Loan Forgiveness — an entirely separate program clearly authorized by Congress. And the Education Department has had to take down its online Income Driven Repayment (IDR) and Direct consolidation applications and pause IDR processing, even for borrowers not enrolled in SAVE, to update its systems and comply with the new court directive.

These latest actions are unwelcome and unhelpful for all, creating “widespread confusion and uncertainty,” according to Justice Department attorneys in their Supreme Court brief. “Indeed, as the Eighth Circuit acknowledged, this is unambiguously worse for all involved.”

Despite this forced “pause,” Parachute Credit Counseling continues to provide free student loan counseling and encourages WNY residents to use this time wisely by making an appointment for free counseling and working with a counselor to create a solid repayment plan—or even better, a plan for ongoing financial stability.

For many months, while all student loan news has focused on various court battles, it was recently announced that there will soon be even more news.

New Student Loan Forgiveness Plan Coming

This major new student loan forgiveness initiative is coming soon through an entirely separate program, expected to be released this fall. It is entirely separate from the SAVE plan, and will target relief to four categories of borrowers, including those who have experienced runaway interest and borrowers who first entered repayment at least 20 or 25 years ago.

There is no doubt that detractors will oppose this plan as well, but the president has not backed down on his promises to forgive student debt.

There is Good News

As previously mentioned:

Western New York residents are eligible for Free Student Loan Counseling at Parachute Credit Counseling.

Parachute Credit Counseling recommends that borrowers contact their office to enroll in the free Student Loan Counseling program, available to all residents of the eight counties of Western New York. Parachute’s Certified Financial Counselorshelp WNY residents consolidate their student loans and review other potential relief options and assistance with existing programs available to help borrowers reduce or eliminate their debt as well as help them in making payment plan arrangements. Call 716-712-2060 or visit https://parachutecreditcounseling.org/ for more information on our Student Loan Counseling Program.

Parachute also provides many other financial counseling services, from budgeting help to credit repair to buying a home. Nationally Certified Parachute counselors offer expert strategies for attaining financial stability, working with their clients every step of the way. Call 716-712-2060 or visit https://parachutecreditcounseling.org/ for information on financial counseling services.