Student Loan Turmoil: What Every Borrower Needs to Know

According to the Education Data Initiative, the average public university student borrows $31,960 to attain a bachelor’s degree.

As of early 2025, total U.S. student loan debt is approximately $1.78 trillion. (Thats trillion with a T). This includes about $1.69 trillion in federal student loans held by over 42.7 million borrowers. Federal student loan debt represents 92.2% of all student loan debt; with about 8% held privately, and $29.3 billion in refinanced loans.

One thing is crystal clear: student loan borrowers are navigating uncharted waters right now. There’s news afoot—not just about repayment or forgiveness, but about the future structure of the Department of Education itself—and it matters deeply if you're striving to regain control of your financial life.

Federal Shake-Up: Who’s Managing Your Loans?

As of July 2025, the Supreme Court cleared the Trump administration’s plan to massively shrink the Department of Education (ED), approving layoffs of about half its staff and permitting key functions—like student loan management—to be shifted to other agencies, including potentially the Small Business Administration or Treasury Department.

Until now, ED (Dept of Education) has overseen nearly $1.6 trillion in loans for more than 40 million borrowers.

What this means:

• The office managing your loans may soon be under a new department or entity.

• Call wait times could increase while lines of communication get restructured and are changing by the moment. This may pose a challenge in getting in touch with the right people.  

• The transition isn’t seamless—no detailed plan has been released, and Congressional approval would be required to fully shutter the department. 

• It’s important to pay attention to any written or electronic communications you receive about your current loans. 

• You may also want to check the StudentLoans.gov portal for updates and changes as well, as this is happening in real time. 

Forgiveness & Income‑Driven Repayment Updates

Even before this restructuring, student loan programs have been in flux:

• The SAVE program and other income-driven plans are being scrapped under the new “One Big Beautiful Bill,” replaced by more rigid options like standard repayment or a 30-year Assistance Plan. 

• The Public Service Loan Forgiveness (PSLF) is under threat, with proposed rules narrowing eligibility based on employer types. 

Plus, forgiven debt might become taxable after December 2025 if Congress doesn’t extend current exemptions. This is also something to keep an eye on and I will do my best to share updates in Stories on Instagram and Facebook, as they happen. 

Millions of borrowers are already staring down resumed wage garnishments, withheld tax refunds, and limited payment plan options with these new changes. For those that may not be familiar, a wage garnishment is when your employer is ordered to withhold money, usually up to 15% of your disposable pay, without a court order. These monies will go to repay your debt, if you have defaulted on your federal student loans. 

Why This Matters for You

• Service disruptions might delay answers to your loan questions.

• Repayment rules are changing—making it more urgent to lock in a plan that works for your budget.

• Know the difference in the loan types or programs offerred as some are fixed rate (not changing, same payment each month) and others are variable or dynamic (which may include adjustable rates or payments, creating peak and valley amounts due from month to month or year to year). 

• More fees and taxes may be coming—especially if forgiveness becomes taxable.

• Defaulted loans, in my opinion, may feel the brunt of this as wage garnishment is a tough consequence and puts strains on your monthly expenses, with only a required 30 days notice. The notice period could also be changed so staying in communication with your servicer is of utmost importance. 

What You Can Do Now

• Keep paying to avoid losing progress or falling behind. Be sure to pay on time as well to avoid additional charges or fees.

• Create or adjust your budget to ensure loan payments are sustainable.

• Consider refinancing or consolidation—but be cautious: private loans usually lack the benefits of federal ones. Also, most federal student loans can only be consolidated once in a lifetime if staying in the protections of the federal programs. 

• Aim for a program or plan that provides a fixed rate with a consistent payment through the remainder of the payoff period. This will make budgeting easier for you and your household and will help you avoid the ups and downs of a variable or income-based repayment type of plan. 

• Stay informed—subscribe to ED updates or financial newsletters.

How OC Financial Coaching Can Help

You don’t have to swim through these changes alone. We help professionals who make good income but feel stuck—especially those with student loans or irregular earnings. And with so much change happening now (and at warp speed), this can easily become overwhelming. 

Together, we’ll:

• Choose the best repayment path for your situation

• Build a realistic budget that works during these changes

• Develop strategies to minimize interest and maximize financial freedom

This isn’t about blame or shame—it’s about taking control.

Ready for Clarity?

If you’re nervous about the shifting landscape or simply want peace of mind around your student loans, let’s chat. You’re not alone—and there are personalized strategies that can work for you.

📅 Book a free Q&A call at OC Financial Coaching today.