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Borrowers who made federal student loan payments in 2025 may be eligible to deduct a portion of the interest paid on their 2025 Federal tax return. Federal loan servicers report interest payments on Form 1098-E if they received $600 or more in interest from a borrower during the tax year.
- Most borrowers who paid $600 or more in interest during 2025 will receive a Form 1098-E from their servicer either electronically or via U.S. mail.
- If a borrower had multiple servicers in 2025, they may receive two or more 1089-Es. If the total interest paid to all servicers is $600 or more, but less than $600 was paid to each individual servicer, the borrower may request a statement of interest paid from each servicer.
- Borrowers should contact their federal loan servicer with questions about whether or not they should receive a 1098-E form.
In December, the U.S. Department of Education (ED) reached a settlement agreement with Missouri to end the litigation over the SAVE (Saving on a Valuable Education) repayment plan, filing a joint request with the federal district court overseeing the lawsuit to formally end the SAVE repayment plan. In a surprising outcome, the court dismissed the case, indicating since the parties were in agreement, there is nothing for the court to rule on. The SAVE repayment plan remains intact for now but leaves millions of SAVE borrowers in administrative forbearance since summer 2024. During this forbearance, interest is accruing (since August 2025) and the time does not count toward student loan forgiveness.
- As part of proposed settlement agreement, ED did not enroll any new borrowers into SAVE, denied any pending SAVE applications, and encouraged borrowers to use the Loan Simulator to explore other repayment plan options.
- The One Big Beautiful Bill (passed in July 2025) phases out the SAVE plan by July 2028, but there are other ways ED may try to block or end the SAVE repayment plan sooner.
- ED could try to revive an injunction brought by the state of Kansas.
- ED could file an appeal to the dismissal of the Missouri-led case.
- ED could initiate a rulemaking process to formally rescind the SAVE plan regulations to implement the settlement agreement with the state of Missouri.
- SAVE being revived for now creates more questions about whether the forbearance will be lifted and allow SAVE borrowers to make payments and/or if ED will start processing forgiveness for SAVE borrowers.
- As of now, ED has not issued formal comments on the court’s ruling and has not indicated how this will impact federal student loan borrowers.
Last year, ED suspended student loan forgiveness for all Income-Driven Repayment (IDR) plans, including the Income-Contingent Repayment (ICR) plan, the Income-Based Repayment (IBR) plan, and the Pay As You Earn (PAYE) plan. ED indicated that the court injunction surrounding the SAVE repayment plan had effectively prevented the department from processing loan forgiveness for eligible student loans under all of the IDR plans.
- In February, ED began resuming processing student loan forgiveness for IBR plans as well as ICR and PAYE plans, leading to thousands of approvals.
- However, with the recent ongoing legal challenges of the SAVE plan, it is predicted that forgiveness may stall again.
- The initial pause in IDR loan forgiveness was due to the court injunction regarding the SAVE plan. Now that the case has been dismissed, many advocacy groups argue that there are no legal barriers to prevent borrowers from making payments on the SAVE plan and receive loan forgiveness.
- For now, SAVE borrowers remain uncertain about the next steps.
Are Your Loans Nearing Default?
Loans enter a delinquency status the first day after a missed payment. Below are three tips to help prevent entering loan default:
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Check your loan status. Borrowers may be at risk for future wage garnishment if the loans have been moved to ED's collection agency, the Default Resolution Group. Log into your online account at your loan servicer’s website to check the loan balance is listed and active. If you are unsure who your loan servicer is, you can look it up by logging into studentaid.gov, navigating to your “Dashboard” and then the “My Loan Servicers” section.
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Explore different repayment options. You may be eligible for a more affordable payment plan based on your income. You can apply online for an income-driven repayment plan.
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Apply for a deferment or forbearance. Both options would put a temporary pause on repayment for a period of time. You can apply online through your loan servicer.
Are Your Loans in Default?
Loans enter default after 270 days have passed without making a loan payment. There are three ways to get out of default:
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Pay the loan in full. Contact the Default Resolution Group or visit myeddebt.ed.gov to confirm the amount owed.
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Rehabilitate the loan. Loan rehabilitation involves making nine consecutive, on-time payments based on income. This option takes longer to get out of default but can save on overall collection costs.
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Consolidate the loans. Consolidation combines multiple loans into one loan with new loan terms. Once the consolidation is complete, the borrower is eligible for lower monthly payments and the loan status is restored to good standing. Borrowers can apply for loan consolidation online.
More information on getting out of default and comparing your options is available at studentaid.gov.
Interested in learning more about borrowing student loans and student loan repayment? Sign up for a free webinar!
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