Sweeping student loan forgiveness changes for federal student loans are going into effect this year, and millions of borrower will be impacted. Here's a breakdown.

Preston Cooper at AEI recently published an analysis of the latest federal student loan data, and the results were sobering: 5.5 million borrowers in default, another 3.7 million more than 270 days late on their payments and 2.7 million in the early stages of delinquency.

The federal Repayment Assistance Plan, or RAP, will be the newest student loan repayment plan. President Donald Trump’s “big, beautiful bill,” passed in 2025, made many changes to federal student loan programs. RAP will replace most existing income-driven repayment student loan forgiveness programs. It will roll out July 1, 2026.

While many types of student loan forgiveness are tax-free federally, several states may levy taxes on student loan forgiveness. Even though some popular programs like Public Service Loan Forgiveness (PSLF) are tax free federally,

Those affected by the change "are obviously, and rightfully so, really worried about this," one advocate said.