Navigating the Shifting Landscape of Federal Student Aid
Federal student aid is a critical resource for countless students pursuing higher education. However, the landscape of federal student aid is constantly evolving, presenting both opportunities and challenges for students, families, and institutions. This article examines recent developments and ongoing issues within the federal student aid system, including fraud prevention efforts, changes to loan repayment plans, and advocacy for more affordable education.
Combating Fraud in Federal Student Aid
One of the most pressing issues in federal student aid is fraud. The Department of Education has been actively working to combat fraud and protect taxpayer funds. The Department of Education announced that it has prevented $1 billion in Federal student aid fraud since January 2025.
Enhanced Fraud Controls
Earlier in 2025, the Trump Administration implemented enhanced fraud controls governing how institutions of higher education distribute financial assistance, including mandatory identity verification for certain first-time student applicants. This effort has halted more than $1 billion in attempted financial aid theft by fraudsters, including coordinated international fraud rings and AI bots pretending to be students. The Biden Administration’s decision to require identity verification from less than one percent of students created a prime opportunity for fraudsters to exploit the Free Application for Federal Student Aid (FAFSA®) process and steal taxpayer funds.
Restoring Prevention Measures
The Trump Administration uncovered that nearly $90 million in federal student aid was fraudulently disbursed, including more than $30 million disbursed to deceased individuals and more than $40 million disbursed to companies using bots disguised as fake students. The Department immediately began restoring fraud prevention measures that the Biden Administration had deprioritized to carry out its illegal student loan bailout and other misguided policies. Because Federal data indicated that the rate of fraud through stolen identities had reached levels that could jeopardize the integrity of federal student aid programs, the Department launched a nationwide identity verification effort to eliminate fraud and abuse in June. Within the first week, the Department identified almost 150,000 suspect identities in current FAFSA forms and immediately alerted postsecondary institutions of fraudulent activity.
Resources for Students and Families
The Department recently launched a new page on StudentAid.gov/scams to provide information to students and families on “fake schools” and how to spot scams. The “schools” claim to offer real degrees and financial aid, and use fake videos, chatbots, and copied content to fool prospective students into applying or paying fees. The Department’s new webpage includes a list of fake schools developed from sources outside of the Department. The Department notes that the list is not intended to be exhaustive and some of the entities on the list have names that are similar to actual or reputable schools.
Read also: Understanding Student Loans
Addressing Student Loan Origination Fees
Another area of focus is the elimination of federal student loan origination fees, often described as a hidden “student loan tax.” Originally created during the now-defunct bank-based student lending era to offset administrative costs, origination fees no longer serve their original purpose.
Financial Burden on Students
In award year 2023-24 alone, student loan origination fees generated an estimated $1.7 billion in revenue for the federal government - approximately $6.5 billion over the past four award years. For students, these fees translate into tangible financial burdens. The average undergraduate borrower in a four-year program pays an estimated $227 in origination fees and associated interest under a standard 10-year repayment plan.
Advocacy for Change
During their time on Capitol Hill, Prewett and Johnson met with the offices of Senator Chuck Schumer, Senator Kirsten Gillibrand, Rep. Nick LaLota, Rep. Yvette Clarke and Rep. Dan Goldman. A central focus of their advocacy was the elimination of federal student loan origination fees, often described as a hidden “student loan tax.”
Stony Brook University continues to champion policies that reduce financial barriers, promote transparency and ensure that higher education remains accessible and affordable for all students by engaging directly with federal policymakers.
Navigating the FAFSA Process
The Free Application for Federal Student Aid (FAFSA®) is the gateway to federal student aid. Staying informed about the FAFSA process and any upcoming changes is crucial for students and families.
Read also: Eligibility for Federal Reserve Internship
Preparing for the FAFSA Season
Wondering what's planned for the upcoming FAFSA® season? Or when that resource will be ready so you can use it with your students? It is important to encourage students and parents to create a StudentAid.gov account as soon as possible before starting their FAFSA form. Students and parents can go to StudentAid.gov/fsa-id/create-account to create an account username and password (FSA ID).
Beta Testing
In August and September, a select group of students had access to the 2026-27 FAFSA form through a nationwide beta testing phase. These sites are not affiliated with or endorsed by ED.
Changes from the One Big Beautiful Bill Act
"Big changes are on the horizon for federal financial aid and the college students who rely on it. When Congress passed the One Big Beautiful Bill Act last summer, included among the extended tax breaks and an increase on some universities' endowment taxes was a slate of new provisions aimed at the federal student aid system.
Impact on Undergraduate Students
"For undergraduate students, Jill Desjean - director of policy analysis with the National Association of Student Financial Aid Administrators - said there's good news and bad news. The good news is that their loan limits haven't changed.
Parent Plus Loans
"That's because the new law did change how much parents and caregivers can borrow to support their undergraduate students' education. "But under the new law, Parent Plus loans are capped at $20,000 a year, or a lifetime total of $65,000 per student.
Read also: First Education Federal Credit Union
Pell Grant Eligibility
"Though there were many proposed cuts to Pell Grant eligibility in the One Big Beautiful Bill Act, Desjean said there were relatively few changes actually made to the largest federal grant program for low- and middle-income students. "Another change address who is eligible for Pell Grants. Anyone who receives a scholarship large enough to cover the full cost of attendance, like some student athletes, will no longer be eligible for Pell. "Students will also be ineligible for Pell if their families have a lot of assets but appear to earn little income on a Student Aid Index calculation.
Understanding Loan Repayment Options
Navigating student loan repayment can be complex, with various plans and options available. It's essential to understand these options to choose the best fit for individual circumstances.
Variety of Repayment Options
"The current number of student loan repayment options varies depending on who you ask, Desjean said. NASFAA's "Notable Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Articles included under the notable headlines section are not written by NASFAA, but rather by external sources. Below, we outline what we know, what we don’t, and some trusted resources to reference if you have more questions or need help. If you need individualized advice about your student loans, please contact your loan servicer or reach out to one of the other resources listed below.
Loan Default
It's important to confirm the status of a loan by logging in to StudentAid.gov account. If loans are in default, a warning message will appear in a red box on the account dashboard. If loans are in default, action must be taken to prevent having wages and tax refunds garnished in the future.
SAVE Repayment Plan
Department of Education (ED) announced a proposed settlement that would end the Saving on a Valuable Education (SAVE) repayment plan for federal student loans. In its announcement, ED gave little concrete, actionable information to borrowers about deadlines for switching plans. ED has not told borrowers how long they’ll have to switch into a new plan or how long it will take for servicers to process applications. Department of Education’s Office of Federal Student Aid provides official updates on the SAVE Plan HERE.
Affording Loan Payments
First, check which repayment plan you’re in by logging in to StudentAid.gov account. Then, compare your plan options using the Federal Student Aid Loan Simulator. If monthly payments would still be unaffordable, payments can be temporarily paused using deferment or forbearance, which allows temporarily stopping federal student loan payments or temporarily reducing monthly payment amount. Terms vary across options.
Changes to Loan Repayment
In July 2025, President Trump signed into law a massive legislative package that makes major changes to federal higher education policy. The Education Department is in the midst of a regulatory process to more clearly define how these changes will be implemented. The law divides borrowers into two categories based on when they took out their loans. Borrowers with loans taken out before July 1, 2026, will retain access to some existing plans but lose access to others. Current plan options can be compared and application for a plan can be done HERE.
Loan Forgiveness Programs
Loan forgiveness programs offer a path to debt relief for borrowers who meet specific criteria.
Income-Based Repayment Plans
For tax purposes, for borrowers who qualified for loan discharge via the IBR, ICR, or PAYE plans before the end of 2025, ED will consider the borrower’s eligibility date as their discharge date, even if they don’t receive the discharge under 2026. This will prevent such borrowers from facing a tax liability on their discharged debt. As of January 1, 2026, debt discharged under income-driven repayment plans is is once again taxable.
Public Service Loan Forgiveness (PSLF)
In June/July 2025, the Education Department held a rulemaking session to consider new regulations that would restrict which employers qualify for the PSLF program. On August 18, 2025, the Education Department published draft rules for public comment.
Resolving Loan Issues
If borrowers encounter issues with their loans, resources are available to help resolve them.
Federal Student Aid Office of the Ombudsman
Submit a request to the Federal Student Aid Office of the Ombudsman. Department of Education to help resolve complaints about federal student loans. Some states offer direct assistance through state student loan ombudsman offices.
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