Colorado borrowers are facing significant shifts in federal student loan repayment as 2025 brings sweeping reforms nationwide. From Denver and Boulder to Colorado Springs and Fort Collins, residents managing education debt must adjust to resumed interest charges, streamlined repayment options, stricter forgiveness rules, and new federal borrowing limits.

With many Coloradans attending institutions such as the University of Colorado system, Colorado State University, and various community colleges, these changes carry important implications for students, graduates, and long-term borrowers alike.

Here are the five major student loan policy changes Colorado borrowers should be aware of this year.

1. Interest Resumes After Pandemic Pause

Federal student loan interest, which had been suspended since 2020 as part of COVID-19 relief, officially resumed in August 2025. Borrowers in Colorado now face renewed interest rates ranging from 4% to 7.5%, depending on loan type.

Given Colorado’s rising living costs—especially in metro areas like Denver and Boulder—this increase adds significant pressure on monthly budgets. Even borrowers who maintained payments during the freeze are seeing loan balances grow as interest compounds.

This resumption is not retroactive, but it signals a return to standard loan conditions that many borrowers must now navigate carefully.

2. Repayment Plans Consolidated to Two Core Options

The federal government has simplified repayment programs into just two primary plans: the traditional 10-year Standard Repayment Plan and the new Repayment Assistance Plan (RAP). RAP bases monthly payments on income and family size, with terms that can extend up to 30 years.

Many Coloradans who previously utilized plans like PAYE, SAVE, or REPAYE will need to transition to RAP or the standard plan. While the goal is to reduce complexity, some borrowers—particularly those with fluctuating incomes in sectors like outdoor tourism, healthcare, and education—find RAP’s longer repayment timeline challenging.

Starting in 2026, new borrowers will be enrolled in RAP by default, with legacy plan holders transitioning by 2028. Colorado’s financial aid offices and nonprofit counseling agencies are providing outreach to help borrowers understand these changes.

3. Default Collections Restarted

Federal student loan collections on defaulted loans resumed in 2025, ending pandemic-era suspensions. This shift means Colorado borrowers in default are now at risk of wage garnishment, tax refund intercepts, and other collection actions.

This has raised concerns in both urban and rural communities, where some borrowers were unaware their loans had defaulted. Legal aid and financial counseling organizations across Colorado report increased requests for assistance from borrowers seeking to avoid or resolve default status.

Borrowers are encouraged to explore rehabilitation options or enroll in RAP to regain good standing and halt collections.

4. Forgiveness Eligibility Narrowed

While Public Service Loan Forgiveness (PSLF) remains available, borrowers must now be enrolled in RAP for their payments to qualify. This affects many public-sector employees in Colorado, including teachers, healthcare workers, and government staff in Denver, Colorado Springs, and beyond.

The elimination of shorter forgiveness paths available under older plans means that many borrowers face extended repayment periods—sometimes adding 5 to 10 years before eligibility for forgiveness.

The forgiveness application backlog continues to impact Coloradans, causing delays and uncertainty regarding qualification status.

5. Federal Loan Limits Enforced

Federal student loan borrowing is now capped for the first time. Parent PLUS loans for undergraduates are limited to $65,000, and graduate loans are capped at $100,000, with exceptions up to $200,000 for certain high-cost professional degrees.

For Colorado students attending institutions such as the University of Colorado Boulder, Colorado State University, and private colleges, these caps may require turning to private loans or other funding sources to cover the cost of education.

Financial aid counselors recommend that students carefully evaluate borrowing needs and explore scholarships and state aid programs to minimize debt.

2025 marks a turning point for Colorado borrowers managing student loan debt. With interest accruing once again, fewer repayment options, tighter forgiveness rules, and new loan limits, borrowers must stay informed and proactive.

While the changes aim to streamline the system and improve long-term sustainability, they also pose new challenges—especially in a state with rising living and education costs.

By leveraging available resources and adjusting repayment strategies accordingly, Colorado borrowers can better navigate this evolving federal student loan landscape.