KEY TAKEAWAYS
- The One Big Beautiful Bill Act (signed July 4, 2025) overhauled federal student loan repayment — eliminating SAVE, phasing out PAYE and ICR by July 2028, and creating a new Repayment Assistance Plan (RAP). PSLF still exists but its qualifying employer list changed in October 2025.
- Veterans rated 100% Permanent and Total (P&T) or TDIU qualify for a Total and Permanent Disability (TPD) discharge of all federal student loans — entirely tax-free at the federal level, permanently. Many now qualify automatically through VA-Education data sharing.
- Military service counts toward PSLF. Active duty qualifies as government employment. Four years of active duty followed by six years working for a federal agency or qualifying nonprofit gets you to the 120-payment threshold for full forgiveness.
- The SCRA caps student loan interest at 6% on loans taken out before active duty — for both federal and private loans — for the duration of active service. For hostile fire/imminent danger deployments, federal loan interest drops to 0% for up to 60 months.
- Non-PSLF loan forgiveness is federally taxable again starting January 1, 2026 — the Biden-era tax waiver expired and was not extended by OBBBA. PSLF and TPD discharge remain permanently tax-free.
- What Changed in 2025–2026: The Big Picture
- Public Service Loan Forgiveness (PSLF)
- Total and Permanent Disability (TPD) Discharge
- SCRA Interest Rate Cap: 6% (and 0%) Protection
- Income-Driven Repayment: What’s Left and How VA Disability Pay Helps
- Military Branch Loan Repayment Programs
- Perkins Loan Cancellation
- What About Private Student Loans?
- Taxability of Forgiveness in 2026
- Frequently Asked Questions
The student loan landscape for military members and veterans looks significantly different in August 2026 than it did even 18 months ago. The Biden administration’s SAVE plan is gone, struck down by federal courts and eliminated by legislation. PSLF still exists but with a revised employer eligibility definition effective July 1, 2026. A new Repayment Assistance Plan has launched. And the tax-free treatment of non-PSLF loan forgiveness expired at the end of 2025. This guide cuts through the changes to explain what programs military members and veterans can actually use in 2026 — and what the recent changes mean for each one.
What Changed in 2025–2026: The Big Picture
Three developments have reshaped the federal student loan landscape since January 2025:
The One Big Beautiful Bill Act (July 4, 2025)
Signed into law on July 4, 2025, OBBBA made the most significant structural changes to the federal student loan system in decades. The key changes affecting military members and veterans:
- SAVE plan eliminated: The Biden-era Saving on a Valuable Education (SAVE) plan — which was already in legal limbo after court injunctions — was formally terminated. Borrowers enrolled in SAVE must switch to another qualifying plan before their loans can be discharged.
- PAYE and ICR phased out: Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans will be sunset by July 1, 2028. Income-Based Repayment (IBR) remains for loans disbursed before July 1, 2026.
- New Repayment Assistance Plan (RAP): A new income-driven plan launched July 1, 2026, for loans disbursed after that date. RAP calculates payments based on gross income rather than discretionary income and offers forgiveness after 30 years. RAP qualifies as a repayment plan for PSLF purposes.
- Non-PSLF forgiveness is taxable again: The temporary tax exemption on forgiven student loan amounts that expired December 31, 2025, was not extended. Forgiveness under IDR plans on or after January 1, 2026, may be reported as taxable income at the federal level. PSLF and TPD discharge are not affected — they remain permanently tax-free.
- Grad PLUS loans end: Federal PLUS loans for graduate and professional students are no longer available to new borrowers after July 1, 2026.
PSLF Employer Eligibility Rule Change (October 2025)
President Trump signed Executive Order 14235 (“Restoring Public Service Loan Forgiveness”) on March 7, 2025, directing the Department of Education to revise which employers qualify for PSLF. After rulemaking, a final rule was published October 31, 2025, and took effect July 1, 2026. The rule narrows qualifying nonprofit employer eligibility to exclude organizations engaged in activities deemed inconsistent with federal or state law. Federal government employers — including all branches of the military and the Department of Veterans Affairs — remain qualifying PSLF employers without change. Existing payment counts and completed forgiveness discharges are protected under the new rules.
SAVE Final Rule Vacated (March 2026)
The SAVE Final Rule was formally vacated by court order on March 10, 2026, after the Eighth Circuit reversed a lower court dismissal in Missouri v. Trump. Borrowers who were enrolled in SAVE need to apply to switch to another income-driven repayment plan. Qualifying payments made while in SAVE still count toward PSLF — they are not lost. Contact your loan servicer or visit StudentAid.gov to apply for plan transition.
Public Service Loan Forgiveness (PSLF)
PSLF remains one of the most valuable student loan tools available to military members and veterans — and despite the 2025–2026 changes, it remains intact for government employees and military personnel.
How PSLF Works for Military Members
PSLF forgives the remaining balance on federal Direct Loans after 120 qualifying monthly payments (10 years) while working full-time for a qualifying public service employer. For military members and veterans:
- Active duty counts as qualifying employment. All active duty military service in the Army, Navy, Air Force, Marine Corps, Coast Guard, and Space Force qualifies as government employment for PSLF purposes.
- Post-service federal employment counts. Veterans who transition to federal civilian employment — at any federal agency, VA, Department of Defense civilian, or other federal employer — continue accruing qualifying payments toward the 120-payment total.
- The math on a typical military career: A service member who serves four years on active duty making income-driven repayment payments, then transitions to a federal civilian job or continues in the Guard/Reserve with a federal employer, can reach 120 payments in 10 total years of public service employment. The remaining balance is then forgiven completely, tax-free.
- VA disability pay doesn’t count as income for IDR payments. VA disability compensation is excluded from Adjusted Gross Income (AGI) — it is tax-exempt. This means veterans on IDR plans may have very low or $0 monthly payments based on their taxable income alone, and $0 payments count as qualifying payments toward PSLF when on a qualifying plan.
- Deferment and forbearance during deployment: Periods of military deferment during active deployment do not count as qualifying PSLF payments but do not disrupt your progress — you simply resume making qualifying payments when you return. Your 120-payment count is not reset by a deferment period.
How to Apply
Submit the PSLF Form (formerly Employment Certification Form) annually and when you change employers, through the PSLF Help Tool at StudentAid.gov/PSLF. The tool verifies employer eligibility and tracks your qualifying payment count. For military service, your DD-214 documents your service dates — certify your military employer the same way you would a civilian government employer. After 120 qualifying payments, submit the PSLF Application for forgiveness.
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Transitioning to a federal civilian job is one of the most effective ways to continue accruing PSLF payments after active duty.
Total and Permanent Disability (TPD) Discharge
TPD discharge is the most powerful student loan benefit available to severely disabled veterans — complete discharge of all federal student loans, permanently tax-free at the federal level. This benefit is administered by the Department of Education, not the VA, but uses VA disability determinations as the qualifying criterion.
Who Qualifies
- 100% Permanent and Total (P&T) service-connected disability rating from the VA — the VA determination letter must show that the disability is service-connected, 100% disabling, and permanent in nature
- Total Disability based on Individual Unemployability (TDIU) — veterans rated less than 100% but determined by the VA to be unable to maintain substantially gainful employment due to service-connected disabilities
- Social Security Administration determination of total disability — non-veterans who receive SSA disability determinations also qualify under the same program
Important: An 80% or 90% VA disability rating, or a rating of 100% that is not designated as Permanent and Total, does not independently qualify for TPD discharge. The P&T designation is required, or the TDIU pathway.
Automatic Discharge Through Data Sharing
Since 2019, the VA and Department of Education share data to automatically identify veterans who qualify for TPD discharge. If you have a 100% P&T rating, the Department of Education’s servicer (Nelnet, which administers the Disability Discharge program) will send you a notification that your loans are being discharged — without requiring you to initiate an application. If you believe you qualify but haven’t received a notification, apply directly at StudentAid.gov with your VA determination letter.
Tax Treatment in 2026
TPD discharge is permanently excluded from federal taxable income under the tax code’s death-and-disability exclusion — this protection was made permanent and is not affected by OBBBA or the expiration of the Biden-era IDR tax waiver. You will not owe federal income tax on discharged amounts. Some states may treat the discharge as taxable — veterans in states with income taxes should confirm their state’s treatment with a tax professional.
SCRA Interest Rate Cap: 6% (and 0%) Protection
The Servicemembers Civil Relief Act (SCRA) caps interest rates on student loans taken out before active duty service began at 6% per year for the duration of active service. This applies to both federal and private student loans — one of the few student loan benefits that reaches private debt.
- What it covers: Any debt incurred before you entered active duty service, including student loans, auto loans, credit cards, and personal loans
- For federal loans: The interest cap is applied automatically — you don’t need to request it
- For private loans: You must notify your lender in writing and provide a copy of your military orders — the cap does not apply automatically
- 0% for hostile fire/imminent danger: If you served in an area qualifying for hostile fire or imminent danger pay, your federal student loan interest rate drops to 0% for up to 60 months. This benefit is applied through the VA-Education data sharing agreement for loans taken out on or after October 1, 2008, and is retroactive to that date
The SCRA cap does not reduce your principal balance or move you toward forgiveness — it reduces your interest cost during service. Use the lower-rate period to make progress on principal or to preserve cash flow for other financial priorities. For a full overview of SCRA financial protections, see our SCRA and MLA guide.
Income-Driven Repayment: What’s Left and How VA Disability Pay Helps
Income-driven repayment (IDR) plans set monthly payments based on a percentage of your income. For veterans, IDR has a structural advantage that most borrowers don’t have: VA disability compensation is not counted as income for IDR calculation purposes because it is tax-exempt and excluded from Adjusted Gross Income (AGI). A veteran whose primary income is VA disability compensation may qualify for $0 monthly IDR payments — and $0 payments count as qualifying payments toward PSLF.
The IDR landscape as of August 2026:
- SAVE: Eliminated. Vacated by courts March 10, 2026. Switch to another plan at StudentAid.gov.
- Income-Based Repayment (IBR): Still available for loans disbursed before July 1, 2026. No longer requires demonstrating partial financial hardship to apply. Forgiveness after 20–25 years (taxable starting 2026 for non-PSLF forgiveness).
- PAYE and ICR: Being phased out by July 1, 2028. Existing borrowers can remain enrolled until sunset.
- Repayment Assistance Plan (RAP): New plan launched July 1, 2026. Available for loans disbursed after that date. Payments based on gross income (not discretionary income). Forgiveness after 30 years. Counts toward PSLF.
If you were in SAVE, your priority is switching to IBR (if your loans were disbursed before July 1, 2026) or RAP (for newer loans) as quickly as possible — qualifying payments don’t accrue while in administrative forbearance after SAVE’s elimination. Visit StudentAid.gov/IDR to apply for plan transition.
Military Branch Loan Repayment Programs
The military’s branch-specific loan repayment programs (College Loan Repayment Programs, or CLRPs) pay your federal student loan servicer directly as an enlistment or reenlistment incentive. These are contract-based benefits negotiated at the time of enlistment — not Department of Education programs. They apply only to federal loans; private student loans are not eligible.
| Branch | Program | Max Benefit | Key Notes |
|---|---|---|---|
| Army | College Loan Repayment Program (CLRP) | $65,000 | Typically pays 33.3% of principal per year of service; must enlist in qualifying MOS |
| Navy | Navy Loan Repayment Program (NLRP) | $65,000 | Available for active duty enlistees in qualifying ratings; must be negotiated at enlistment |
| Air Force | AF Student Loan Repayment Program | $10,000 | Lower maximum than Army/Navy; specific AFSC eligibility applies |
| National Guard | Student Loan Repayment Program (SLRP) | $50,000 | Each state’s National Guard administers separately; terms vary by state |
| Marine Corps | No CLRP currently available | — | Marines may use PSLF, TPD, and SCRA protections |
| Coast Guard | Student Loan Repayment Program | Varies | Confirm current terms with recruiter; eligibility by rate and specialty |
Tax note: Branch loan repayment program payments are generally treated as taxable income — they are included in your W-2 and taxed as regular compensation. Factor this into your financial planning; the tax on a $65,000 benefit at a 22% marginal rate is a meaningful out-of-pocket cost. Confirm current program terms with a recruiter or personnel officer — amounts, eligible specialties, and service commitments change annually.
Perkins Loan Cancellation
Perkins Loans — a federal loan program that ended for new borrowers in 2017 — had a unique military benefit: up to 100% cancellation for service in a hostile fire or imminent danger area, typically at 50% per year of qualifying service. Veterans with older Perkins Loans who served in qualifying areas should contact their school (which administered Perkins Loans directly) or their loan servicer to apply for cancellation. This benefit is separate from all other programs and applies only to Perkins Loans, not Direct Loans or FFELP loans.
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What About Private Student Loans?
The federal programs above — PSLF, TPD discharge, IDR forgiveness, and CLRPs — apply only to federal student loans. Private student loans are largely excluded from federal relief programs, with one exception: the SCRA 6% interest cap applies to private loans taken out before active duty, provided you request it in writing from your lender with a copy of your military orders.
For private student loan relief, three paths are worth exploring:
- Refinancing: If your credit and income qualify, refinancing private loans at a lower rate reduces your total cost significantly. VA disability compensation can strengthen your income profile for refinancing applications at some lenders.
- Lender hardship programs: Some private lenders offer military forbearance or hardship modification programs beyond SCRA requirements. Contact your servicer directly — benefits are lender-specific and not universal.
- Death discharge: Most private lenders now discharge loans upon the borrower’s death, though terms vary. Review your promissory note for the co-signer release provisions, which are especially relevant for military families.
Taxability of Forgiveness in 2026
This is an area of significant change in 2026 that catches many borrowers off guard. A clear map:
| Forgiveness Type | Federal Tax in 2026 | Notes |
|---|---|---|
| PSLF forgiveness | Tax-free (always) | Permanently excluded from federal taxable income by statute |
| TPD discharge (disability) | Tax-free (permanent) | Death and disability exclusion made permanent; state taxes may still apply |
| IDR forgiveness (non-PSLF) | Taxable (2026+) | Biden-era tax waiver expired Dec 31, 2025; not extended by OBBBA. “Tax bomb” risk for large balances. |
| Branch CLRP payments | Taxable | Included in W-2 as income; plan accordingly |
| Perkins cancellation | Generally taxable | Consult a tax professional for your specific situation |
The “IDR tax bomb” risk is most significant for borrowers with large loan balances approaching the 20–25 year forgiveness mark under IBR, PAYE, or ICR. If you are in this situation, consult a student loan specialist or tax advisor about strategies to manage the taxable income event — including whether switching to a PSLF pathway or accelerating payments before forgiveness makes financial sense.
Frequently Asked Questions
The SAVE plan was vacated by courts on March 10, 2026, and formally eliminated. You need to apply to switch to another income-driven repayment plan — IBR if your loans were disbursed before July 1, 2026, or RAP for newer loans. Visit StudentAid.gov/IDR to apply. Qualifying payments you made while enrolled in SAVE still count toward PSLF — they are not lost. If you’re in administrative forbearance following SAVE’s elimination, payments during that period do not count as qualifying PSLF payments, so switching plans promptly is important to preserve your progress.
Not automatically. TPD discharge requires either a 100% Permanent and Total (P&T) service-connected disability rating or a TDIU (Total Disability based on Individual Unemployability) determination from the VA. An 80% or 90% rating, or a 100% rating that is not designated as permanent, does not independently qualify. If you believe your disabilities render you unable to maintain substantially gainful employment, pursuing a TDIU claim through the VA is the path to TPD eligibility. See our VA disability ratings guide for how ratings and TDIU work.
Yes. Your past military service counts toward PSLF as long as you certify it through the PSLF Help Tool, and your DD-214 documents your service dates and employer. Military service on active duty qualifies as government employment. Veterans who have transitioned to civilian life in a non-qualifying employer need to count only their active duty years — they would need qualifying employment in a new role to continue accumulating PSLF payments after separation.
No. VA disability compensation is tax-exempt and excluded from Adjusted Gross Income (AGI). Since IDR payments are calculated based on taxable income, VA disability pay is not included in the calculation — a veteran whose only or primary income is VA disability compensation may qualify for $0 monthly IDR payments. Those $0 payments count as qualifying payments toward PSLF when on an eligible repayment plan, making PSLF particularly powerful for disabled veterans who also have federal employment.
Yes — for loans taken out before you entered active duty service. The SCRA cap applies to both federal and private student loans originated before active duty began. For federal loans, the cap is applied automatically. For private loans, you must submit a written request to your lender with a copy of your military orders. The cap applies for the duration of your active service period, not permanently.
This article is provided by USMilitary.org, an independent educational resource. We are not affiliated with the Department of Education, Department of Defense, VA, or any government agency. Student loan rules are changing rapidly — verify current program details at StudentAid.gov and consult a student loan specialist for guidance specific to your situation.
are vets grandchildren eligible for student’s loan
are vet’s grandchildren eligible for student’s loans
I Celeste Edna-Rae Miller need Montgomery GI bill benefits to cover my past student loans. Ursuline College, Cleveland State University,I.T.T. Technical Institute, Stratford Institute.
You guys missed the mark and have slighted many men who volunteered to serve their country for four years. You have forgot that many of them put their lives on the line (I was not one of them) even though the time they served did not fall within the time frames that were established. You did however award many cooks and bottle washers who never came near any danger, and gave them benefits because of the time frame they served in.
There are more than men that served in the military and that are put in danger so before you go writing anything get all the information right
I am a 70% disabled vet. Should I also be entitled for student loan forgiveness. I served my country and am very proud to be a vet. I will be dead and buried before this Loan is paid off.
I am an Iraqi War combat veteran. Is there a way that my wife can be eligible to not pay any interest on her student loans since she’s my spouse?
Who can we contact about student loans
How does this benefit apply to veteran cosigners of student loans for a child?
I am a spouse of a 100% disabled Vietnam Veteran. I am a 10 yr. Special Ed. Teacher with student loan debt. Is there some relief for us, for me to get my student loans forgiven? Thank you!
I am veteran who is receiving social security disability. I am permanently disabled but it is not service connected. I have a private student loan with Navient. Will it be forgiven? I will be dead and buried before it will be paid off and then it will pass to my daughter to pay off.
The forgiveness should apply to all HONORABLY DISCHARGED VETERANS because they also served their country and although they may not have been injured while on active duty, they nevertheless put their lives on the line for this country. I served 13 years of honorable service and gave up a lot of personal freedoms while doing so. Who should veterans like us contact to have someone advocate for us all?