Student Loans 2026 Midterms: What Veterans Must Know

Student Loans and the 2026 Midterm Elections: What Veterans and Military Families Need to Know

The 2026 midterm elections will determine control of Congress, and student loan policy is on the ballot. The One Big Beautiful Bill Act of 2025 ended the SAVE plan, created the Repayment Assistance Plan (RAP), and reimposed federal taxation on some loan discharges. Veterans with 100% P&T or TDIU ratings remain eligible for tax-free Total and Permanent Disability discharge. Active-duty service counts toward Public Service Loan Forgiveness.

Quick Facts: Student Loans and the 2026 Midterms

What Is the One Big Beautiful Bill Act and How Does It Affect Student Loans?

The One Big Beautiful Bill Act (OBBBA) is a comprehensive federal law signed on July 4, 2025, that overhauled the federal student loan system. It eliminated the SAVE repayment plan, created the new Repayment Assistance Plan (RAP), ended several income-driven repayment options, and reimposed federal taxation on most loan discharges after December 31, 2025.

For veterans and military families, the OBBBA has several key effects:

• SAVE plan terminated. The Saving on a Valuable Education plan was permanently eliminated in March 2026 following an Eighth Circuit Court of Appeals ruling that deemed it illegal. Approximately 7 million borrowers on SAVE must switch to another repayment plan.

• New RAP plan launched. The Repayment Assistance Plan became available July 1, 2026, and is the only income-driven option for loans disbursed on or after that date. RAP sets payments based on adjusted gross income and extends the forgiveness timeline to 30 years for most borrowers.

• Taxation on forgiveness reimposed. Federal tax-free treatment for most income-driven repayment (IDR) discharges expired December 31, 2025. However, PSLF forgiveness remains tax-free, and TPD discharge for veterans with 100% P&T or TDIU ratings remains permanently tax-free federally.

• PSLF changes. Borrowers on RAP can still qualify for Public Service Loan Forgiveness, but the OBBBA requires new borrowers to enroll in RAP to qualify.

Why the OBBBA Matters for Veterans

Veterans using the GI Bill or other military education benefits may also carry federal student loan debt. Approximately one-quarter of veterans using the Post-9/11 GI Bill have federal student loan debt when they graduate, and about 200,000 active-duty members owe a collective $2.9 billion.

The OBBBA’s changes to repayment plans mean veterans who were on SAVE or other eliminated plans must choose a new repayment option — or risk default. Veterans with 100% P&T or TDIU ratings should pursue a TPD discharge rather than relying on IDR forgiveness, because TPD discharge remains tax-free federally.

How the 2026 Midterm Elections Could Change Student Loan Policy

Control of Congress will determine whether the OBBBA’s student loan changes are expanded, rolled back, or left intact. Republicans currently hold the House and Senate, but Democrats are campaigning heavily on affordability issues, including student loan debt.

Democratic Position on Student Loans

If Democrats win control of the House or Senate, they would likely focus on:

• College affordability — larger Pell Grants and bills to lower or eliminate student loan debt

• Oversight and investigations — subpoena power to investigate loan servicing problems and Education Department oversight

• Rollback attempts — trying to overturn Trump administration changes to PSLF and other programs

• Budget concessions — using the appropriations process to secure modest changes, such as tax-free loan forgiveness

However, a Democratic Congress cannot override a presidential veto without a supermajority. President Trump would likely veto any wholesale rollback of the OBBBA.

Republican Position on Student Loans

Republicans argue that their policies focus on helping borrowers who need the most help. Their approach includes:

• New repayment plans — RAP and the Tiered Standard plan, launched July 1, 2026

• Debt collection — resuming payments on defaulted loans (though wage garnishment and tax refund seizures remain paused as of August 2026)

• Opposition to broad forgiveness — arguing debt cancellation is unfair to borrowers who repaid their loans

What Veterans Should Watch For

Regardless of which party wins, veterans should monitor:

1. PSLF rule changes — the Trump administration issued a new rule empowering the Education Secretary to remove employers from PSLF eligibility

2. RAP implementation — whether the new plan works smoothly for veterans transitioning off SAVE

3. Tax legislation — whether Congress restores federal tax-free treatment for IDR discharges

4. Veterans benefits package — the Take Care of America’s Veterans Act, which includes the Major Richard Star Act, stalled before the midterms

Veterans Student Loan Programs: Complete Comparison

Veterans have access to more student loan relief programs than almost any other group of borrowers. The table below compares the major options.

Total and Permanent Disability (TPD) Discharge

The TPD discharge is the most powerful student loan relief program for veterans. It wipes out all federal student loans for veterans with a 100% Permanent and Total (P&T) disability rating or a Total Disability Individual Unemployability (TDIU) determination.

Key details:

• The VA reports qualifying ratings to the Department of Education, which begins the discharge automatically

• No physician paperwork is required for the VA pathway

• A rating below 100% — including 70%, 80%, or 90% — does not qualify on the VA path, but a medical certification path exists

• TPD discharge is permanently tax-free at the federal level

Public Service Loan Forgiveness (PSLF)

Military service is qualifying employment for PSLF. Active-duty time counts toward the 120 qualifying payments required for forgiveness, and veterans can certify past service going back to 2007.

Key details:

• Must work full-time for a qualifying government or 501(c)(3) nonprofit employer

• Only federal Direct Loans are eligible; FFEL and Perkins loans must be consolidated

• The forgiven amount is tax-free

• OBBBA requires new borrowers to enroll in RAP to qualify

Repayment Assistance Plan (RAP)

RAP is the new income-driven repayment plan created by the OBBBA. It launched July 1, 2026, and is the only income-driven option for loans disbursed on or after that date.

Key details:

• Monthly payments based on adjusted gross income and family size

• Payments range from $10 to 10% of income depending on earnings

• Forgiveness timeline extended to 30 years for most borrowers

• Forgiven balances are subject to federal income tax after 2025

How to Apply for Veterans Student Loan Relief

Step 1: Determine Which Program Fits Your Situation

Use this decision tree:

• Do you have a 100% P&T or TDIU VA rating? → Apply for TPD discharge

• Are you on active duty or a veteran working for a government or nonprofit employer? → Enroll in PSLF

• Do you have federal student loans but no disability rating? → Consider RAP or other repayment plans

• Are you in default? → Explore rehabilitation or consolidation

Step 2: Gather Required Documents

Step 3: Apply Online

• TPD Discharge: Apply at Nelnet.com or through the Department of Education

• PSLF: Submit the PSLF form at StudentAid.gov

• RAP: Apply at StudentAid.gov

• SCRA: Contact your loan servicer directly

Step 4: Track Your Application

• Monitor your StudentAid.gov account for updates

• Respond promptly to any requests for additional information

• Keep copies of all submitted documents

Common Mistakes Veterans Make with Student Loans

State Differences: How States Tax Student Loan Forgiveness

Federal tax treatment of student loan forgiveness changed on January 1, 2026, when the American Rescue Plan Act’s tax-free provision expired. Now, most income-driven repayment discharges are taxable federally. PSLF and TPD discharge remain tax-free federally.

At the state level, treatment varies significantly:

Veterans should check their state’s Department of Revenue for specific guidance. The average amount forgiven under IDR plans is about $49,700 nationally, with higher averages in Georgia ($56,958) and Louisiana ($55,278).

Latest Rule Changes Affecting Veterans in 2026

SAVE Plan Elimination

The Eighth Circuit Court of Appeals permanently eliminated the SAVE plan in March 2026, bringing years of legal challenges to an end. Approximately 7 million borrowers in SAVE forbearance must switch to a new repayment plan.

RAP Launch

The Repayment Assistance Plan opened for enrollment on July 1, 2026. It is the only income-driven option for new borrowers and those with loans disbursed after that date.

PSLF Employer Restrictions

The Trump administration issued a new rule empowering the Education Secretary to remove employers from PSLF eligibility. Democrats in Congress are attempting to overturn this rule, arguing it could leave some borrowers without promised relief.

Veterans Benefits Package Stalled

The Take Care of America’s Veterans Act, which includes the Major Richard Star Act, stalled before the midterms. The bill would allow combat-injured retirees to receive full retirement pay and VA disability benefits without offset. Action is expected after Congress returns following the elections.

Common Questions

How do the 2026 midterm elections affect my student loans?

Control of Congress will determine whether the OBBBA’s changes are expanded or rolled back. A Democratic House or Senate could provide oversight, investigate servicing problems, and push for tax-free forgiveness through the budget process. However, President Trump could veto any major rollback.

Will the SAVE plan come back after the 2026 elections?

Unlikely. The SAVE plan was permanently eliminated by court ruling in March 2026. Even a Democratic Congress could not restore it without new legislation and a presidential signature. Borrowers should focus on RAP or other available repayment plans.

Is the Total and Permanent Disability discharge still available for veterans?

Yes. The TPD discharge remains available for veterans with 100% P&T or TDIU ratings. It is permanently tax-free at the federal level. The VA reports qualifying ratings to the Department of Education, which begins the discharge automatically.

Does active-duty service count toward Public Service Loan Forgiveness?

Yes. Military service is qualifying employment for PSLF. Active-duty time counts toward the 120 qualifying payments, and veterans can certify past service going back to 2007. The forgiven amount is tax-free.

What is the Repayment Assistance Plan (RAP)?

RAP is the new income-driven repayment plan created by the OBBBA. It launched July 1, 2026, and sets monthly payments based on adjusted gross income and family size. Payments range from $10 to 10% of income, with forgiveness after 30 years for most borrowers.

Are forgiven student loans taxable in 2026?

Most income-driven repayment discharges are taxable federally after December 31, 2025. PSLF forgiveness and TPD discharge for veterans remain tax-free. At the state level, eight states tax certain forgiven loans, with Mississippi taxing all forms of forgiveness.

What should veterans do before the midterm elections?

Veterans should: (1) verify their repayment plan and switch off SAVE if applicable; (2) apply for TPD discharge if they have a 100% P&T or TDIU rating; (3) certify PSLF employment if working for a qualifying employer; and (4) check their state’s tax treatment of forgiven loans.

How many veterans have student loan debt?

Approximately one-quarter of veterans using the Post-9/11 GI Bill have federal student loan debt when they graduate. About 200,000 active-duty members owe a collective $2.9 billion in student loan debt.

Can I get my student loans discharged if I have a 70% or 80% VA rating?

No, the VA pathway for TPD discharge requires a 100% P&T or TDIU rating. However, a medical certification path exists for veterans who are unable to engage in substantial gainful activity due to a disability, regardless of VA rating.

What happens if I don’t switch off the SAVE plan?

Borrowers in SAVE forbearance will need to resume payments on an alternative plan. Loan servicers began sending notices July 1, 2026, giving borrowers 90 days to switch before potential auto-enrollment. Failure to switch could result in higher payments or default.

Key Takeaways

• Student loan policy is on the ballot in 2026. Control of Congress will determine whether the OBBBA’s changes are expanded or rolled back.

• The SAVE plan is gone permanently. Approximately 7 million borrowers must switch to RAP or another repayment plan.

• Veterans with 100% P&T or TDIU ratings qualify for tax-free TPD discharge. This is the most powerful relief option available and remains unchanged.

• Active-duty service counts toward PSLF. The forgiven amount is tax-free, but OBBBA requires new borrowers to enroll in RAP.

• Most IDR forgiveness is now taxable federally. PSLF and TPD discharge remain tax-free.

• State tax treatment varies. Mississippi taxes all forgiveness; Arkansas taxes IDR but not PSLF; most other states follow federal treatment.

• The RAP plan launched July 1, 2026. It is the only income-driven option for new borrowers.

• A Democratic Congress could provide oversight and modest reforms through the budget process, but a presidential veto limits major changes.

• The veterans benefits package stalled before the midterms. The Major Richard Star Act awaits action after the elections.

• Veterans should act now — verify your repayment plan, apply for TPD if eligible, and certify PSLF employment.

Official Resources

• Federal Student Aid: StudentAid.gov

• VA Disability Compensation: VA.gov/disability

• Total and Permanent Disability Discharge: Nelnet.com/TPD

• Public Service Loan Forgiveness: StudentAid.gov/PSLF

• IRS Tax Information for Veterans: IRS.gov

• Consumer Financial Protection Bureau: ConsumerFinance.gov

• USA.gov Veterans Benefits: USA.gov/veterans-benefits