Student loan repayment policies across the U.S. are shifting significantly in 2025—and in Wisconsin, where thousands of graduates carry federal student debt, the impact is already being felt. As new rules take hold, borrowers are adjusting to resumed interest charges, fewer repayment options, and stricter federal loan limits.

Home to respected institutions like UW-Madison, Marquette, and UW-Milwaukee, Wisconsin has long relied on a mix of federal aid and state support to make higher education accessible. But as 2025 progresses, both recent graduates and longtime borrowers across the state—from urban centers like Milwaukee and Madison to rural communities—are navigating a changing landscape of loan management.

Here’s a closer look at the five major changes Wisconsin borrowers should understand this year.

1. Interest Resumes After Nearly Five Years

For the first time since the 2020 COVID-19 emergency relief, interest is once again accruing on federal student loans. The pause officially ended in August 2025, and borrowers in Wisconsin—especially those previously on the SAVE plan—are starting to feel the impact.

Interest rates now range between 4% and 7.5%, depending on the loan type. With Wisconsin’s average student debt hovering around $31,000, this means a significant increase in monthly costs for many. Even those who have been making steady payments are watching their balances grow due to interest compounding.

This change is especially challenging for borrowers in regions of the state with lower median incomes. While interest is not being applied retroactively, the return to normal loan terms is already placing new pressure on household budgets, particularly in cities like Green Bay, Eau Claire, and Racine.

2. Federal Repayment Options Are Streamlined

Previously, federal borrowers could choose from several income-driven repayment plans, including PAYE, SAVE, and REPAYE. In 2025, that menu has been simplified to just two core options: the traditional 10-year Standard Plan and a new Repayment Assistance Plan (RAP).

RAP adjusts monthly payments based on income and family size but can extend the term up to 30 years. In Wisconsin, this shift is being met with mixed reactions. Some borrowers appreciate the simpler system, while others say RAP’s longer forgiveness timeline—compared to SAVE’s 20-year horizon—adds financial strain.

This streamlining is being phased in, with new borrowers enrolled in RAP starting in 2026 and existing borrowers from legacy plans transitioned by 2028. Local financial aid offices and state resources are working to help residents understand how to make the best choice during the transition.

3. Default Collections Resume Statewide

Another significant update in 2025 is the resumption of collection activities on defaulted student loans. After several years of suspension, federal enforcement has restarted. This means that borrowers in Wisconsin with loans in default may now face wage garnishment, intercepted tax refunds, and other collection actions.

Statewide, it’s estimated that over 200,000 borrowers are currently in some form of delinquency or default. The Wisconsin Department of Financial Institutions has reported a surge in inquiries from individuals unaware that their loans had entered default status.

Collection notices are being issued across the state, and borrower advocacy groups are urging those affected to explore rehabilitation programs or repayment plans like RAP to avoid long-term financial penalties.

4. Narrower Forgiveness Pathways

Forgiveness options have also narrowed in 2025. Public Service Loan Forgiveness (PSLF) remains available but now only counts payments made under RAP. This has significant implications for public-sector workers in Wisconsin—including educators, healthcare workers, and government employees—who may need to switch plans to remain eligible.

Additionally, many of the more generous forgiveness terms under previous plans like PAYE and SAVE are no longer accessible to new borrowers. For many Wisconsinites, this means additional years of payments and increased long-term costs.

Forgiveness processing delays are also affecting borrowers in the state. As of mid-2025, tens of thousands of Wisconsin residents were still awaiting decisions on applications for PSLF or income-driven repayment forgiveness. Many report confusion over the new criteria and concern about missing out on earned credits.

5. Federal Loan Caps Introduced

A first for the federal system, loan caps have been introduced in 2025. Undergraduate Parent PLUS loans are now limited to $65,000, while graduate borrowing is capped at $100,000—with exceptions up to $200,000 for high-cost degrees such as medicine or law.

This is already affecting students at institutions like UW-Madison and Marquette, where tuition and associated costs often exceed these new federal limits. As a result, many Wisconsin families are turning to private loans or seeking additional scholarships to cover gaps.

Higher education counselors across the state are advising students to carefully consider borrowing levels and long-term repayment plans when choosing programs. Some students are reevaluating their enrollment decisions altogether due to limited federal aid availability.

The 2025 reforms are reshaping the student loan system across the country—and Wisconsin is no exception. From the return of interest to stricter forgiveness terms and default enforcement, the landscape for borrowers is becoming more complex.

While the changes promise simplicity in some areas, they also present new financial challenges, particularly for those with low to moderate incomes or working in public service. As the academic year begins and repayment policies continue to evolve, Wisconsin borrowers will need to stay informed, seek guidance, and take proactive steps to manage their education debt.

How these reforms will ultimately affect access to higher education, financial stability, and long-term repayment outcomes remains to be seen—but for now, 2025 marks a critical turning point in how Wisconsin residents approach student loans.