Biden-era student loan program to end. What Wisconsin borrowers should know

More student loan borrowers are falling behind on payments than ever before. The Biden-era SAVE plan is dead. Collections are moving from one federal agency to another. New loan limits will take effect this summer.

Carol Trone can barely keep up with all of the student loan news, and she’s the executive director of the Wisconsin Coalition on Student Debt, a nonprofit that helps borrowers.

 “I check headlines every day,” she said. “These are crazy times.”

Wisconsin has about 720,000 borrowers who hold $24 billion in federal student loan debt, according to the latest federal education data. Nearly 125,000 of them are in default, including more than 50,000 who are newly in default as of last year.

Many have questions about repayment, loan consolidation and more.

“You’re not alone,” Trone said. “The stories we hear are of frustration, confusion, loan servicers changing – it’s a lot.”

Trone encouraged borrowers to contact the coalition’s free, confidential helpline. She also broke down some of the biggest changes for 2026:

More borrowers in default

Student loan payments were paused during the COVID-19 pandemic. Payments resumed in 2023, but borrowers did not face credit damage or default during a yearlong “on-ramp” period. That ended Sept. 30, 2024.

A borrower is considered delinquent when they haven’t made a payment in 30 days. They are in default when they haven’t made a payment in 270 days, though it may take two additional payment cycles to be reflected on credit reports.

More borrowers are falling behind on their payments. Nearly 8 million borrowers had defaulted on $181 billion in federal student loans by the end of last year, according to U.S. Education Department data. Another 3 million loan recipients were at least three months late on their payments.

It’s the highest combined rate of serious delinquency and default since the government began its data reporting system nearly a decade ago, the New York Times reported.

Biden’s SAVE plan is dead

Former President Joe Biden first proposed canceling up to $10,000 in federal student loan debt for borrowers earning less than $125,000 per year. After the U.S. Supreme Court knocked it down, he launched a new program that promised a lower monthly bill and a shorter path to loan forgiveness than other repayment plans.

About 135,000 Wisconsin borrowers enrolled in Biden’s Saving on a Valuable Education plan, also referred to as SAVE, Trone said. But several legal challenges have effectively killed the program.

SAVE borrowers need to apply to a different repayment plan, the federal education department said March 27. In July, loan servicers will begin notifying borrowers they have 90 days to switch plans or automatically be placed in the standard plan.

The new repayment options will be far less borrower-friendly, Trone said. A family of four making $84,000 would have paid $36 per month on the SAVE plan. That could jump to $440 per month.

The federal student aid website includes a loan calculator tool to get a sense of how much payments will increase and which plan will lead to the lowest payments.

Borrowers seeking Public Service Loan Forgiveness face more complications

The Public Service Loan Forgiveness program offers a path for borrowers who work in public service – such as teaching, nursing and policing – to have their debt erased after 10 years on the job.

The Trump administration is trying to change the program’s rules. The federal education department said that, beginning July 1, it would deny loan forgiveness to workers whose government or nonprofit employers engage in activities with a “substantial illegal purpose.” It could include organizations, for example, that work with undocumented immigrants or provide gender-affirming care to children.

Several predominantly Democratic cities sued last fall. The case remains pending.

Borrowers seeking public service loan forgiveness who enrolled in SAVE are caught in legal limbo. Their payments were frozen because of the court cases. But that also means they can’t make any progress toward loan forgiveness.

“Their applications are going nowhere,” Trone said. “So there’s high frustration.”

Student loan oversight moving to different federal agency

The U.S. Education Department announced the Treasury Department will assume responsibility for collecting on defaulted student loans.

The transition of the office of Federal Student Aid is happening in phases, and it’s unclear when the first phase will begin, Trone said. A borrower’s terms and interest rate won’t change during the transition. The consequences of falling behind on payments won’t change either. The government can garnish your wages, and withhold Social Security payments and federal tax refunds.

New loans subject to new borrowing limits

The One Big Beautiful Bill Act, President Donald Trump’s tax and spending bill signed into law last summer, sets new caps on direct federal loans: $50,000 annually and $200,000 over a lifetime. It also eliminates the Graduate PLUS loan program, which many professional-degree seeking students use to cover living expenses while in school.

Republicans say the changes are long overdue and will encourage schools to rein in rising tuition costs for pricy professional and graduate degree programs.

But some financial aid experts worry the new caps will price some students out of pursuing degrees in law, medicine, veterinary medicine and more, or push them to the private loan market. Private loans offer fewer protections, higher interest rates, less favorable repayment terms and may require a co-signer. 

Wisconsin student loan borrowers can get free help from hotline

Borrowers in some states can get help and file complaints against servicers with student loan ombudsmans. In other states, there is a higher education agency to turn to for help. Wisconsin has neither.

The Wisconsin Coalition on Student Debt started up to fill the gap. The nonprofit group runs an anonymous and confidential hotline for borrowers.

Call 833-589-0750. There’s no wait time. No artificial intelligence-driven chatbots. Questions go directly to human student loan experts.

The hotline hasn’t taken off as much as you might think. Since its informal launch during the pandemic, Trone estimated the coalition has helped about 900 borrowers.

“We are pushing so hard to get the word out,” she said.

New incentives for employers to help workers with student loan debt

Employers can pay up to $5,250 per year per employee for qualified student loan payments, tax-free.

The incentive began in 2020 as a temporary provision, which deterred some employers from pursuing it, Trone said. But the measure now has permanent status.

The coalition is assessing which Wisconsin employers offer this perk to employees.

Kelly Meyerhofer has covered higher education in Wisconsin since 2018. Contact her at kmeyerhofer@gannett.com or 414-223-5168. Follow her on X (Twitter) at @KellyMeyerhofer.