Student Loans in 2025: What Most People Don't Know

Student loans in 2025 are one of those expenses many folks think they understand until they're in the thick of it. It's easy to get caught between changing laws, new forgiveness plans, and unexpected impacts on your credit score. And in 2025, a lot is shifting, from who manages your loans to how long it will take to repay them.

Whether you've already graduated, are still in school, or are just trying to make sense of your repayment options, there's a good chance you've missed some of the fine print. Let's break down what's going on.

The Debt Is Bigger - and Older -Than You Think

Many people associate student loan debt with young adults fresh out of college. But here's the thing: over 20% of student loan borrowers are 50 or older. That's because these loans often stick around for decades. Some are paying for their ongoing education, while others have taken out loans to help their children.

As of early 2025, American students collectively owe $1.77 trillion in loan debt, comprising both federal and private loans. Federal loan balances average about $38,000.

But what is surprising to many people is how long these loans linger. For some, it's a 10-year plan. For others, it might take 20 years or more. For people making only minimum payments, it barely covers the interest, allowing the balance owed to grow over time.

Forgiveness Programs: Still Around, but Changing Fast

Public Service Loan Forgiveness (PSLF) has been a lifeline for folks working in government, nonprofits, and public schools. After making 120 qualifying monthly payments, borrowers could have the remaining balance wiped away. But as of 2025, that program is being re-evaluated. There are proposals to tighten the criteria for who qualifies and what constitutes eligible work. If you're counting on PSLF, now's a good time to double-check your paperwork and ensure you're still on track.

There's also a newer program for borrowers facing serious financial challenges - medical debt, caregiving duties, or long-term unemployment. It could benefit up to 8 million people, but it is not guaranteed to last. Legal challenges could delay or even block it. Still, if you're struggling, it's worth looking into.

Credit Scores Took a Hit - And Student Loans Are Part of the Reason

During the pandemic, federal student loan payments were paused. This interruption gave many borrowers a break, not just financially but also on their credit reports.

No required payments meant no missed payments. But now that the pause is over, delinquencies are showing up again. In February 2025, the average FICO credit score in the U.S. dropped to 715. While this might not sound dramatic, it represents one of the biggest declines in a decade.

Missed or late student loan payments can hurt your credit more than you'd think. A lower credit score can make renting an apartment, obtaining a car loan, or securing certain jobs more challenging. If you're unsure where you stand, now's a good time to check your credit and put your numbers into a student loan calculator to get a clearer picture of your repayment plan.

You Might Not Know Your Loan Servicer Anymore

Most borrowers don't realize that the people you deal with when you make payments (called loan servicers) don't own your loan. A major shake-up is happening behind the scenes. The Department of Education is downsizing, and some loan management duties may shift to other federal agencies like the Small Business Administration.

In addition, the CFPB, or Consumer Financial Protection Bureau, which used to monitor how loan servicers treated borrowers, has scaled back its oversight. That means fewer people are watching to ensure servicers do their job properly. If something feels off, like a misapplied payment or confusing paperwork, you might need to be your advocate more than ever.

Discharge in Bankruptcy: Still Rare, But Not Impossible

You've probably heard the old saying: "You can't get rid of student loans in bankruptcy." And for years, that was true. However, the rules have shifted slightly. Borrowers who can prove "undue hardship" may now have a better shot at having their loans discharged in court. It's still not easy and not guaranteed, but judges are showing more flexibility - especially for borrowers who are older, disabled, or stuck with loans from predatory schools.

Tax-Free Forgiveness May Be Going Away Soon

Another thing to watch is that any student loan debt forgiven between now and the end of 2025 is tax-free. That means you won't owe federal taxes on that amount if your balance gets nullified through PSLF, an income-driven repayment plan, or another forgiveness option.

However, unless Congress extends the rule, forgiven balances starting in 2026 could be considered taxable income. If you've got a forgiveness plan in motion, that might be a reason to move things along faster.

The Bottom Line

Student loans always have strings attached, but 2025 is a year of rapid change. Programs are shifting, oversight is shrinking, and borrowers are increasingly responsible for staying informed.

However, staying ahead of these changes - by reviewing your options, checking your credit, and running the numbers - can help you make more informed decisions.

If not, try plugging your loan details into our Student Loan Repayment Calculator for a payoff path. Visualize how small adjustments to your approach can have a big impact.