On an August night in Texas, Pablo Pratt put his 1 year-old son to sleep and sat down with his wife, trying to make the numbers work. Their rent was due, child care costs were piling up, and now, after changes to popular repayment options, $582 in student loan interest had quietly hit his account. ● Pratt, 28, was one of millions enrolled in the Biden administration’s Saving on a Valuable Education plan who were charged interest for the first time in a year. His family was already living paycheck to paycheck when the surprise interest charge added more stress. ● “We’re barely just coasting by,” Pratt said. “It spirals and then one thing leads to another, you can go from something good to something really bad, really fast.”
With $130,000 in student loan debt, Pratt scrambled to make up the extra payment. He sifted through their garage and listed old coffee makers and an XBox on Facebook Marketplace. His wife looked to pick up extra babysitting shifts. In the end, it wasn’t enough, and they got a loan from Pratt’s parents.
Gen Z, the cohort born between 1997 and 2012, is navigating a quickly changing student loan landscape. Under the Trump administration, elimination of popular repayment options and changes to federal aid are destabilizing some young people’s financial futures and in other cases, pushing them out of higher education altogether. Young people feeling the impacts say they’re applying to jobs in a panic, experiencing anxiety and in extreme cases, discussing moves out of the country.
Mike Pierce, executive director of the debt-focused advocacy group Student Borrower Protection Center said 2025 has seen the most monumental change to the student loan system in two decades.
After a nearly five-year break during the pandemic, student loan borrowers are facing financial consequences if they fall behind on payments. Although the federal student loan payment pause lifted in September 2023, it wasn’t until fall 2024 that missed payments over 90 days late started being reported to credit bureaus. Borrower delinquencies started appearing on credit reports in 2025, leading to sudden drops in credit scores.
In addition, nearly 8 million borrowers enrolled in the SAVE plan started accruing interest on their loans on Aug. 1 for the first time since former President Joe Biden placed the group in forbearance in July 2024, a move that paused both monthly payments and interest accrual.
“People that have debts right now, there isn’t an easy answer,” Pierce said. “A lot of people are going to get bills that they can’t afford, and they’re going to have to make the very hard choice between damaging their credit and making ends meet.”
Those on the SAVE plan remain in general forbearance for their minimum monthly payments, but for the typical borrower on the plan, the resumption of interest charges alone could cost them about $300 per month, according to a July analysis from SBPC. That amounts to more than $3,500 in interest costs annually.
Tyler Lobos, 22, knows taking out student loans is a choice, but as a 17year-old, it didn’t feel like one. He felt a college degree would be hugely helpful when it came time to enter the workforce, and that loans come with the territory – in his case, $80,000 of them.
But when he checked his student loan portal days after graduating from Bloomsburg Commonwealth University of Pennsylvania in May, he had a sinking feeling when he saw his loans staring back at him.
“The only thing that takes up my mind is that student loan,” Lobos said. “As a 17-year-old going into college for the first time … you don’t understand the gravity of that.”
Lobos said he has anxiety with nearly every purchase he makes.
“It definitely eats you up,” Lobos said. “It feels like a ball and a chain. … I’m definitely locked to these things.”
Lobos planned on using the SAVE plan to pay off his loans, but can no longer enroll in the plan because a Feb. 18 federal court injunction prevented its implementation.
“It was really nice looking before I was a senior in college, and seeing that that SAVE plan was an option,” Lobos said. “Now that it no longer is, that definitely upped the stress levels a little bit; it puts a lot more on the shoulders of the borrower.”
When Pratt found out about changes to SAVE, he stress-applied for hundreds of jobs in an attempt to find a higher-paying salary. He and his wife have had conversations about moving to a country with cheaper costs of living like Bolivia, where his grandparents live.
Pratt has a bachelor’s degree in international relations and global studies, a bachelor’s degree in history, and a master’s in information security and privacy from the University of Texas-Austin, but hasn’t been able to get a job in any of the fields he studied.
“People are pushed against the wall right now,” Pratt said. “It’s incredibly expensive (to live), but degrees are getting to a point where they are worthless.”
Still, he’s considering going back to graduate school part-time to put his loans into a temporary in-school deferment, which he views as a short-term solution.
On July 1, 2026, borrowers taking out new federal loans will be grappling with President Donald Trump’s One Big Beautiful Bill Act, a law that will limit repayment options and cap borrowing limits for graduate students. This includes eliminating Graduate PLUS loans, forcing more students to apply for private loans or reconsider their education options. Current borrowers will also see their repayment options diminish by 2028.
“This is the largest change to student aid policy I’ve ever seen,” said Megan Walter, a senior policy analyst with the National Association of Student Financial Aid Administrators. “A lot of our concerns are how quickly they’re trying to implement this … it’s going to be difficult to explain to students.”
Cost of living is frequently cited as a top financial concern among young people. Nearly a third of Gen Z and millennials worry their finances could lead them to experience homelessness, and they are almost three times more likely than older respondents to feel that way, according to a 2024 survey conducted by Acorns and Opinium Research.
As young Americans navigate changes to student debt financing, Walter said new borrowers should take a holistic approach.
“You should be looking at all four years, figuring out how much you need for all four years, and working your way back,” Walter said.
For borrowers in their second or third year of college worried about getting across the finish line, Pierce recommends speaking with financial aid offices to access grants or cheaper loans to fill gaps.
Walter anticipates that more students will opt for more cost-effective education paths, like starting with a two-year community college associate degree before transferring to a four-year university, or attending schools closer to home to reduce housing expenses.
“I don’t know where the bubble bursts. Like, at what point do students say, ‘this is unaffordable’ and people just stop going?” Walter said.
Financial therapist Lindsay Bryan-Podvin said some young people are intentionally opting out of higher education and the associated student loan debt by working jobs with manual labor, as highlighted by recent viral TikTok videos of young employees’ side hustles.
She pointed out that much of Gen Z came of age watching their families navigate the 2008 recession, and then graduated or went through developmental years during a pandemic.
“Gen Z is starting their financial lives with more debt, fewer social safety nets and higher costs across the board. Where millennials were told a version of, ‘just get a degree and you’ll be fine,’ Gen Z wasn’t given that same message,” Bryan-Podvin said.
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