What a year, right?
Whether you’re entering college for the first time or have student loans that have been in repayment for years, you likely know what a wild year 2024 was for student loan borrowers.
Here are some of the biggest highlights of the past year — and what you can expect to happen with student loans in 2025.
5 Student Loan Highlights for 2024
Student loans were in the news often in 2024, but these five major events may have affected you:
The Student Loan “On Ramp” Period Ended
During the COVID-19 pandemic, then-President Trump instituted the federal student loan payment freeze. He, and later, President Biden, extended the freeze several times, so borrowers didn’t have to make payments for years.
Payments resumed in October 2023, but the Biden Administration instituted an “on ramp” period to help ease borrowers back into repayment. The on ramp period gave borrowers 12 months without having to worry about issues like collections calls or negative credit reporting.
However, the on ramp period ended in September 2024, so not defaulting on your federal loans has serious consequences.
Federal Loan Interest Rates Increased
Historically, federal student loans have relatively low rates. However, federal rates skyrocketed in 2024. Loans for undergraduate students issued between July 1, 2024 and June 30, 2025 will have a 6.53% rate, 1.13 percentage points higher than the rate on the same loan type last year.
For graduate school students and parent borrowers, the rates are even higher; Parent PLUS and Grad PLUS Loans are 9.08% — the highest rate ever for these loans.
With such high rates, private student loans can be appealing alternatives. For borrowers with good to excellent credit, loans are available with fixed rates under 4.00%, so they could grow in popularity.
Payment Forbearance for ‘SAVE’ Borrowers Was Extended
The Biden Administration introduced the Saving on a Valuable Education (SAVE) plan as a new income-driven repayment plan that would reduce the payments of some federal loan borrowers. However, lawmakers filed lawsuits challenging the plan, and courts have blocked it from going into effect.
As a result, those who enrolled in SAVE or applied for it are in forbearance; they don’t have to make payments, and interest doesn’t accrue. The forbearance period was extended again, so borrowers won’t have to make payments until 2025.
President Biden Made One Last Effort for Loan Forgiveness
President Biden has just a few weeks left in office. However, he is making one more effort to provide borrowers with loan forgiveness. The so-called “Plan B” was submitted to the Office of Management and Budget for review. If it moves forward, it could provide substantial relief to select borrowers. However, many challenges are expected, which could delay or derail Plan B from happening.
Private Student Loan Balances Increased
Private student loans make up a small portion of the student loan industry; as of 2024, private student loans made up less than 8% of outstanding education debt. However, private student loans are increasing in popularity.
Federal loans faced rising rates in 2024, and delays with the Free Application for Federal Student Aid (FAFSA) may have caused borrowers to rely on private student loans more than they did in the past. Outstanding private student loan balances increased by $3.15 billion between 2023 and 2024.
What Will Happen With Student Loans in 2025?
After an action-packed year for the student loan industry, what does 2025 have in store? With a new president entering office, there are likely to be some changes, but what form those changes will take is yet to be seen.
There are some key things to note:
- Blanket loan forgiveness is unlikely: The newly-elected President Trump has been vocal about his opposition to blanket student loan forgiveness policies. And with Republican majorities in the House and Senate, any proposed measures will likely be voted down.
- Rates may decrease: The Fed rate (or the rate that banks use when lending to one another) was cut, and more rate cuts are expected. Loan interest rates tend to follow the Fed’s lead, so the rates on student loans and student loan refinancing may decrease. If you have high-interest debt, refinancing when rates drop could allow you to save money or reduce your payments.
If you’re feeling nervous or uncertain about the coming year and your student loans, there are steps you can take now to prepare.
If your payments are unaffordable, applying for an income-driven repayment plan (for federal student loan borrowers) could give you some relief. Or, if you have private student loans, you may be eligible for refinancing, and you could secure a lower rate and smaller monthly payment. You can check your rate with ELFI and get a quote without impacting your credit score.
