Student loan policy is never static. Each federal budget proposal, each adjustment to repayment programs, and each change to compliance rules has direct and lasting consequences for students, schools, and the higher education system as a whole. The latest federal budget bill outlines eight major changes to student loans that could significantly reshape repayment, forgiveness, and compliance requirements.
For borrowers, these changes may mean fewer options, higher costs, or more complex decisions about repayment. For institutions, the stakes are even higher. Rising cohort default rates (CDRs), compliance pressure from the Department of Education, and the constant threat of losing Title IV funding all make it essential for schools to prepare for what’s coming.
At Champion Solutions, we believe both borrowers and schools deserve clarity and proactive guidance. In this in-depth article, we’ll walk through each of the 8 major student loan changes, explain their implications, and highlight what borrowers and institutions can do to navigate them successfully.
1. End of Public Service Loan Forgiveness (PSLF)
What’s Changing
The budget proposal eliminates the Public Service Loan Forgiveness program (PSLF), which currently allows borrowers working in qualifying government or nonprofit jobs to have their remaining student loan balance forgiven after 10 years of payments.
Impact on Borrowers
Borrowers pursuing careers in teaching, public health, law enforcement, and nonprofit service may no longer have access to forgiveness opportunities. Without PSLF, many will face decades of repayment. Some may reconsider career paths altogether, particularly in fields where salaries are lower but PSLF made repayment manageable.
Borrowers will need expanded financial literacy education to understand alternative repayment strategies, such as Income-Driven Repayment (IDR) plans, and to calculate long-term costs. Confusion and misinformation about the change could lead to higher delinquency and eventual default.
Learn more about Public Service Loan Forgiveness.
Impact on Schools
Schools with programs that traditionally feed into public service roles — education, social work, law enforcement, nursing — may see shifts in enrollment patterns. Without PSLF, some students may shy away from these career paths, impacting admissions and program funding.
Financial aid offices will need to counsel borrowers proactively, ensuring students understand repayment realities. Institutions that fail to address these concerns risk higher default rates, which directly affect their CDR and Title IV eligibility.
Champion Solutions Perspective
PSLF has been a critical safety net for many borrowers. If removed, the burden shifts to schools to fill the gap through financial literacy programs, free debt counseling, and proactive repayment support. Champion Solutions helps institutions design and deliver these interventions so that students are supported, and schools remain compliant.
2. Elimination of Subsidized Federal Loans
What’s Changing
The proposal phases out subsidized federal loans, which currently allow undergraduate borrowers to avoid accruing interest while enrolled at least half-time.
Impact on Borrowers
Without subsidized loans, interest begins accruing immediately, even while students are still in school. This leads to larger balances upon graduation and higher monthly payments. Students from lower-income backgrounds, who rely most heavily on subsidized loans, will face the steepest challenges.
Borrowers may become discouraged about borrowing altogether, limiting access to higher education. Others may take on private loans, which often have less favorable terms and fewer protections.
Impact on Schools
Institutions serving higher numbers of Pell Grant–eligible students will likely feel the greatest strain. Enrollment may drop as affordability declines, and those who do borrow may be more likely to default.
For financial aid teams, the elimination of subsidized loans increases the importance of loan counseling and repayment education. Without proper guidance, students may underestimate their future obligations, raising delinquency and default risks.
Champion Solutions Perspective
Champion Solutions works with institutions to prepare for these shifts by providing customized repayment projections, financial literacy workshops, and student-centered counseling programs. With fewer protections for students, schools must step up to ensure borrowers understand the financial implications of unsubsidized borrowing.
3. Streamlined Income-Driven Repayment (IDR) Plans
What’s Changing
The budget consolidates the current patchwork of IDR plans into a single option: borrowers pay 12.5% of discretionary income, with loan forgiveness after 15 years (for undergraduates) or 30 years (for graduates).
Impact on Borrowers
Simplification has benefits. Borrowers no longer have to choose among multiple plans with slightly different terms, which reduces confusion. However, for many, the new payment structure may be higher than their current plan, especially undergraduates who previously had access to lower payment caps.
Forgiveness timelines also shift. While some may benefit from shorter repayment, others — particularly graduate borrowers — could find themselves in repayment for decades longer.
Explore Income-Driven Repayment Plans.
Impact on Schools
While fewer repayment options may reduce complexity, the risk lies in borrower shock when payments under the new plan are higher than expected. This may increase delinquency rates if students are unprepared.
Financial aid administrators must be ready to explain the new rules clearly, ensuring students don’t disengage or delay repayment out of confusion. Without intervention, default rates may climb.
Champion Solutions Perspective
Our team helps schools build communication strategies that explain IDR changes in plain language. By proactively engaging with borrowers, institutions can prevent confusion from escalating into delinquency. Champion Solutions provides training for aid teams, student outreach campaigns, and compliance resources to ensure schools stay ahead of the curve.
4. Elimination of Graduate PLUS Loans
What’s Changing
Graduate PLUS loans, which allow graduate students to borrow up to the cost of attendance, would be eliminated.
Impact on Borrowers
Graduate students will face limited borrowing options. Many may be forced to turn to private loans with higher interest rates, fewer repayment protections, and no federal forgiveness pathways. This could discourage some students from pursuing advanced degrees, particularly in fields with high tuition but moderate salaries (e.g., social work, education, healthcare).
Impact on Schools
Graduate enrollment is a critical funding stream for many universities. Without access to Graduate PLUS loans, institutions may see declines in graduate program enrollment, directly affecting budgets and long-term planning.
Schools must prepare for more financial aid appeals and greater reliance on institutional aid. At the same time, students who do take out private loans may be more financially vulnerable, increasing the risk of default.
Champion Solutions Perspective
Champion Solutions helps institutions adapt to these shifts by providing financial literacy education tailored to graduate borrowers, ensuring they understand private loan risks and repayment realities. Schools that act now can maintain enrollment and support graduate borrowers effectively.
5. Reduced Funding for Federal Work-Study
What’s Changing
The Federal Work-Study program, which provides part-time employment opportunities to help students finance education, faces budget cuts.
Impact on Borrowers
With fewer work-study jobs available, students may need to borrow more to cover expenses. This increases total debt loads and long-term repayment obligations.
Impact on Schools
Work-study is not only a financial aid resource but also a retention tool. Without it, schools may see reduced student engagement and increased reliance on loans. This raises the risk of delinquency and default for vulnerable populations.
Champion Solutions Perspective
By combining default prevention services with enhanced financial literacy programs, Champion Solutions helps schools offset the loss of work-study funding. We ensure students have access to tools that make repayment manageable and help institutions safeguard against rising CDRs.
6. Simplified FAFSA and Pell Grant Adjustments
What’s Changing
The FAFSA will be simplified, and adjustments to Pell Grant funding are expected.
Impact on Borrowers
While a simplified FAFSA reduces administrative burdens, changes to Pell Grant eligibility may reduce aid for some students. Those who lose Pell funding will need to borrow more or consider alternative education options, raising the risk of long-term debt challenges.
Impact on Schools
Pell Grants are a lifeline for low-income students. Adjustments could affect enrollment at community colleges, trade schools, and universities with high percentages of Pell-eligible students. Schools may face retention challenges and financial aid appeals.
Learn more about FAFSA and Pell Grants.
Champion Solutions Perspective
We help institutions strengthen financial literacy and debt counseling programs to prepare Pell-eligible students for repayment challenges. Champion Solutions equips schools with the tools needed to protect access and minimize default risks.
7. Borrower Defense to Repayment Restrictions
What’s Changing
Borrower Defense to Repayment (BDR), which allows borrowers to discharge loans if misled by institutions, faces tighter restrictions.
Impact on Borrowers
It will become harder for students to discharge loans, even when institutions engage in misconduct. This places more responsibility on borrowers to repay debts regardless of circumstances.
Impact on Schools
While fewer BDR claims may reduce liability for institutions, reputational risks remain. Transparency and compliance are more critical than ever. Schools must ensure communications, marketing, and aid counseling are fully aligned with DOE requirements to avoid scrutiny.
Champion Solutions Perspective
Champion Solutions helps institutions align compliance practices with federal standards, reducing risk of BDR claims and supporting transparent borrower communication.
8. Interest Accrual Changes During Forbearance
What’s Changing
Interest subsidies during forbearance would end. Borrowers who pause payments will still accrue interest, leading to larger balances upon reentry.
Impact on Borrowers
For borrowers facing temporary hardship, forbearance will no longer offer relief from growing balances. Exiting forbearance with higher principal makes repayment harder and increases the likelihood of default.
Impact on Schools
Rising balances contribute directly to delinquency and default risks, which affect institutional CDR and Title IV eligibility. Schools will need to intervene early, helping borrowers explore alternatives such as IDR plans instead of defaulting to forbearance.
Champion Solutions Perspective
Champion Solutions partners with schools to deliver early intervention strategies, proactive outreach campaigns, and free debt counseling. By guiding students away from risky repayment decisions, we help institutions protect both their students and their compliance standing.
Preparing for Change with Champion Solutions
The eight proposed changes to student loan policy represent a fundamental shift in repayment, forgiveness, and borrower protections. For borrowers, they mean fewer safety nets and greater long-term obligations. For schools, they mean higher compliance pressure, greater risks to Title IV eligibility, and more complex financial aid landscapes.
At Champion Solutions, we see these changes not as roadblocks, but as opportunities for schools to strengthen their commitment to students. Through default prevention programs, financial literacy resources, debt counseling, and compliance support, we help institutions reduce default risks, protect funding, and build lasting student trust.
Contact Champion Solutions today to learn how we can help your institution prepare for these changes and safeguard student and institutional success.
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