Answers to the most common questions about federal student loans, repayment plans, forgiveness programs, and policy changes. Can't find your answer? Email us at hello@insolveo.com.
SAVE (Saving on a Valuable Education) was a federal student loan repayment plan that offered low payments for income-driven borrowers, with income thresholds at 225% of the federal poverty line. On March 10, 2026, the 8th Circuit Court of Appeals struck it down, ruling it violated the Administrative Procedure Act. All 7.2 million borrowers enrolled in SAVE were forced to switch to a different plan.
You must select a new repayment plan before your servicer's deadline (typically 30-45 days from March 10). Your best option is Income-Based Repayment (IBR). Log into StudentAid.gov, select IBR, authorize IRS data retrieval, and call your servicer to confirm. If you miss the deadline, you'll be automatically moved to the 10-year Standard Plan, which has much higher payments.
IBR is a federal income-driven repayment plan where your payment is calculated as a percentage of your discretionary income: 10% for loans disbursed after 2014, or 15% for loans before 2014. If your income is very low, your payment can be $0. Forgiveness comes after 20 years (post-2014 loans) or 25 years (pre-2014 loans). IBR is available immediately and doesn't require waiting for new legislation.
RAP is a new income-driven plan launching July 1, 2026, under the Working Families Tax Cuts Act. It offers sliding-scale payments of 1-10% of adjusted gross income, an interest subsidy for on-time payments, and principal reduction through matching credits. For most low-income borrowers, RAP will offer lower payments than IBR. You can switch from IBR to RAP once it launches.
It depends on your income. SAVE's income threshold was 225% of the federal poverty line (roughly $31,000 for a single person), so nearly half of SAVE borrowers paid $0. IBR's threshold is 150% of poverty (roughly $20,700). For someone earning $25,000/year, SAVE meant $0 but IBR means about $36/month. If you earned above SAVE's threshold, your IBR payment will be similar to what you paid in SAVE.
PAYE (Pay As You Earn) is another income-driven plan offering 10% of discretionary income with forgiveness after 20 years. PAYE is no longer available to most new borrowers and is phasing out. IBR is more widely available and is the better choice. PAYE is mentioned here only for reference if you're already in it.
If you miss your servicer's deadline, the Department of Education will automatically move you to the 10-year Standard Plan. This is the most expensive option available. For someone with $40,000 in loans, the Standard Plan typically means $400+ per month. You can still switch later, but you'll have to file a new application and wait in another processing queue, delaying your relief by weeks or months.
PSLF forgives your remaining federal student loan balance after you make 120 qualifying monthly payments while working full-time for a qualifying employer (federal, state, or local government; certain nonprofits; certain tribal organizations). You don't have to wait 20-25 years—if you work in qualifying employment, you could have your loans forgiven in as little as 10 years. The payments must be under a qualifying repayment plan, and your employment must be certified.
Some SAVE payments counted toward PSLF and some didn't, depending on when you made them and your loan servicer. This is complicated. If you're pursuing PSLF and had loans in SAVE, you should check your payment count at StudentAid.gov and file an updated Employment Certification Form (ECF) when you switch to IBR. You may also be eligible for the PSLF Buyback program to restore lost months.
The PSLF Buyback allows borrowers who lost qualifying payments due to periods of forbearance or non-qualifying plans to restore those months by paying a fee. The cost depends on your loan balance and how many months you're restoring. There's currently a backlog of 88,000+ applications. The Buyback is an option if you've lost significant time toward PSLF, but filing for IBR and making current payments going forward is usually more effective.
Yes. As of January 1, 2026, federal student loan forgiveness under income-driven repayment plans is taxable as ordinary income. The American Rescue Plan exemption expired on December 31, 2025. If you have $50,000 forgiven, you could owe $10,000-15,000 in taxes. This is a real cost that should factor into your long-term planning, but it doesn't change your immediate action—switch to IBR now to avoid higher payments and keep your forgiveness clock running.
Borrower Defense is available if you attended a school that engaged in fraud or misconduct. The program allows loan cancellation without an income limit. Eligibility is strict and the process can take months. If you believe you have a Borrower Defense claim, file at studentaid.gov. Note that the Trump administration's approach to Borrower Defense is stricter than under previous administrations.
If your school closed while you were enrolled or shortly after you withdrew, you may be eligible for Closed School Discharge, which cancels your federal loans. You don't have to repay. However, the school must have closed after you enrolled or within a defined timeframe. Check the Federal Student Aid website to see if your school appears on the list of closed institutions.
For federal student loans, you are in default when you fail to make a payment for 270 days (about 9 months). You'll receive notices along the way, but at the 270-day mark, your loan servicer will declare you in default. This has serious consequences: your loan loses its federal protections, the full balance can be accelerated (due immediately), and the government can use wage garnishment, tax offset, and other collection actions.
Yes. Once you're in default, the Department of Education can garnish your wages without a court order. Wage garnishment can take up to 15% of your disposable income. However, there are exemptions and protections. If you're facing wage garnishment, you have options: rehabilitation agreements, income-driven repayment, or filing a defense against garnishment. Act quickly—don't wait until garnishment starts.
If you're in default, a rehabilitation agreement requires you to make 9 on-time monthly payments (usually at an affordable amount) within 20 days of the due date. After 9 successful payments, your loan is removed from default status and the default notation is removed from your credit report. You then enter a normal repayment plan. It's one of the fastest ways to recover from default.
Yes. The most reliable way is to enter an income-driven repayment plan before or after garnishment begins. You can also file a Defense Against Wage Garnishment form if you believe the garnishment is based on fraud or if you weren't properly notified. Wage garnishment is stressful, but it's reversible if you act. Contact your loan servicer or the Department of Education immediately if you're facing garnishment.
A hardship discharge is extremely rare but available in cases of severe financial hardship that prevent you from working. You must prove that repaying would create undue hardship, which is a high bar. The government uses the Brunner test (inability to maintain a minimal standard of living, likelihood of lasting effect, good faith effort to repay). Few borrowers succeed with hardship discharge. Income-driven repayment is almost always available and is a better path.
Yes. If you're in default, the Department of Education can intercept your federal income tax refund and apply it to your student loan balance. This is called tax offset. However, if you enter an income-driven repayment plan, tax offset generally stops. Wage garnishment and tax offset are serious but reversible consequences of default—the key is to act before these actions begin.
Parent PLUS loans are federal loans borrowed by parents on behalf of students. Unlike student loans (which the student borrows), Parent PLUS loans are in the parent's name and the parent is responsible for repayment. Interest rates are fixed at 8.5% (2023-24 cohort). There's no income limit to borrow, but you must have good credit. Many parents take on Parent PLUS debt not realizing the long-term impact on their retirement.
Parent PLUS loans have very limited forgiveness options. They do not qualify for income-driven repayment. However, they can be forgiven under PSLF if you work in qualifying public service. You can also consolidate your Parent PLUS loan into a Federal Direct Consolidation Loan and then enter an income-driven plan—this is the main strategy for getting your Parent PLUS payment lower. Contact the Department of Education for information about consolidation options.
You can consolidate Parent PLUS loans into a Federal Direct Consolidation Loan through the Department of Education. Once consolidated, your loans become eligible for income-driven repayment, which can lower your payment significantly. This is the main strategy for Parent PLUS borrowers to reduce payments. You can consolidate anytime—there's no deadline. The tradeoff is that you lose some PLUS loan benefits (like the option for loan forgiveness after 25 years under certain conditions).
Yes. If you borrowed a Parent PLUS loan before July 1, 2006, you may be eligible for Parent PLUS consolidation with a special income-based repayment option that expires. Additionally, there are deadlines related to PSLF eligibility if you work in public service. If you're concerned about deadlines, contact your loan servicer or the Department of Education directly to confirm your options.
Federal consolidation (which allows income-driven repayment) is almost always better than private refinancing for Parent PLUS loans. Private refinancing means losing all federal protections (income-driven repayment, PSLF, deferment/forbearance). You should only refinance if you have high income, excellent credit, and want a lower interest rate—and you'll lose access to flexible repayment plans if your income changes. Federal consolidation first, then reassess after.
Consolidation combines multiple federal loans into one. The main benefit is simplicity (one payment instead of many). The tradeoff is that you lose some borrower protections (like Public Service Loan Forgiveness eligibility for non-consolidated loans). If you're pursuing PSLF, you must consolidate. If you're struggling with multiple payment deadlines, consolidation can help. Consult our consolidation guide to understand the tradeoffs for your situation.
Consolidation is a federal program that combines your federal loans into one. Refinancing is when you borrow from a private lender to pay off your federal loans. Consolidation keeps you in the federal system with all its protections. Refinancing often means lower interest rates but you lose federal benefits (income-driven repayment, PSLF, deferment). Never refinance federal loans unless you're confident you don't need federal protections.
Refinancing makes sense only if: you have high income (stable, not at risk), excellent credit (650+), and a loan balance large enough to justify refinancing fees. Even then, you lose income-driven repayment, PSLF eligibility, deferment, and other federal protections. If your income is variable, if you're pursuing PSLF, or if you might need income-driven repayment in the future, stay in the federal system. Private loans offer no flexibility once you're locked in.
If you're in an income-driven plan, you must verify your income annually. You can do this through StudentAid.gov by authorizing IRS data retrieval (fastest option, 1-2 weeks) or by submitting documents manually (takes longer). Missing your recertification deadline means your servicer will automatically move you to the 10-year Standard Plan. Set a calendar reminder to recertify every year on or before your due date.
Yes. Deferment (for certain borrowers, like those in school or with economic hardship) and forbearance (a more general option) allow you to temporarily pause payments. However, interest typically continues to accrue, and your loan balance grows. Income-driven repayment is almost always better than deferment or forbearance—you can often qualify for $0 payments without interest accruing. Contact your servicer to explore all options.
The Standard 10-year Plan is the default federal repayment option. It requires fixed monthly payments large enough to pay off your loan in 10 years. For $40,000 in loans, the Standard Plan payment is typically $400+/month. It's the highest payment option. It's only appropriate if you have high income and can afford it. If you have lower income, income-driven repayment is always better—you pay less per month and only pay back what you can afford.