On July 4th, President Donald Trump signed the One Big Beautiful Bill (“Big Bill”) into law. The biggest changes for borrowers include new limits on how much they can borrow in federal student loans, big changes to both current and future borrowers’ repayment options, and changes that will make it harder for borrowers who were harmed by their schools to get debt relief. Unfortunately, for many low-income borrowers, these changes will make paying for college even more difficult. In addition, the bill has changes happening on many different timelines, adding even more complexity to an already confusing system. This blog explains what the bill will mean for current and future student loan borrowers and lays out when those changes will likely occur.
What Does This Bill Do?
- The Big Bill creates a new income-driven repayment plan.
- The Big Bill will end the SAVE Plan and other income-driven repayment plans, leaving only the Income-Based Repayment (IBR) Plan and RAP Plans after July 1, 2028.
- The Big Bill changes borrowers’ repayment options if they borrow any loans after July 1, 2026.
- The Big Bill ends most Parent PLUS borrowers’ access to any Income-Driven Repayment plan.
- The Big Bill Ends the Grad PLUS loan program and creates new limits on how much students and parents can borrow in federal student loans.
- The Big Bill makes it harder for borrowers to get relief after their school closes or their school harmed them.
- The Big Bill will allow borrowers to rehabilitate loans up to two times to remove them from default.
1. The Big Bill creates a new income-driven repayment plan.
The Big Bill creates the Repayment Assistance Plan, or RAP plan, a new income-driven repayment plan that is very different from the existing IDR plans. Unlike the existing IDR plans, even the poorest student loan borrowers must make a minimum payment of at least $10 a month, regardless of whether or not they fall below the federal poverty line and regardless of their family size. Monthly payments will be calculated as a percentage of the borrower’s total income (using adjusted gross income, or AGI) minus $50 per month per dependent:
Like the SAVE plan, the RAP plan will waive any interest not covered by the borrower’s monthly payment. Additionally, unlike SAVE or other existing plans, the RAP plan will reduce borrowers’ principal by up to $50 if the payment does not do so.
The RAP plan is significantly more expensive for borrowers than the SAVE plan, but will also be more expensive than the other existing IDR plans for low-income borrowers.
Unlike existing IDR plans that provide cancellation after 10-25 years, the RAP plan will only provide cancellation after 30 years of qualifying payments.
The Big Bill specifies that the RAP plan should be available to borrowers beginning on July 1, 2026.
2. The Big Bill will end the SAVE Plan and other income-driven repayment plans, leaving only the Income-Based Repayment (IBR) Plan and RAP Plans after July 1, 2028.
In addition to creating a new IDR plan, the Big Bill instructs the Department of Education to eliminate the PAYE, ICR, and SAVE plans by July 1, 2028 – and it could happen sooner. After those plans are eliminated, borrowers whose loans were all disbursed before July 1, 2026 will have the following repayment options:
- Standard Repayment Plan
- RAP
- Income-Based Repayment (IBR)
- Graduated and Extended Plans
For most borrowers, the required monthly payments in these plans will be significantly higher than payments in the SAVE Plan. This will therefore be an expensive change for many borrowers to deal with.
The Bill makes small changes to the Income-Based Repayment plan so that more existing borrowers will be eligible for it. As a result of the Bill, borrowers no longer have to show that they have a “partial financial hardship” to be eligible for the plan. Additionally, as discussed below, the Bill will allow certain Parent PLUS loan borrowers to enroll in IBR – though they’ll have to jump through hoops first.
Otherwise, IBR remains unchanged for existing borrowers: Borrowers that took on loans before July 1, 2014 will be in “old IBR,” meaning that their monthly payments will be calculated as 15% of any income they earn above 150% of the federal poverty guidelines for their family size (with $0 payments for borrowers who earn less than 150% of the guidelines), and they will receive cancellation after 25 years of qualifying payments. Borrowers that took on loans between July 1, 2014 and July 1, 2026 will be in “new IBR” meaning that their monthly payments will be 10% of any income they earn above 150% of the federal poverty guidelines for their family size (again, with $0 payments for those who earn less than 150% of the guidelines), and they will receive cancellation after 20 years of qualifying payments.
If borrowers enrolled in one of the eliminated plans (SAVE, PAYE, or ICR) do not choose another repayment plan by the time those plans are eliminated, then their Direct Loans taken out for their own education will be placed in the RAP plan and any FFEL loans and any Direct Consolidation loans that repaid a Parent PLUS loan will be placed in the IBR plan.
3. The Big Bill changes borrowers’ repayment options if they borrow any loans after July 1, 2026.
Borrowers that take on any new loan — including borrowers that consolidate an existing federal loan —on or after July 1, 2026 will only be eligible for two repayment plans: the standard repayment plan or the RAP plan.
The Big Bill changes standard repayment for loans issued on or after July 1, 2026 and determines the repayment length based on the total amount borrowed.
Borrowers pursuing Public Service Loan Forgiveness (PSLF) should note that while payments in a 10-year standard plan qualify for forgiveness, payments in standard plans with repayment periods longer than 10 years do not qualify. As a result, borrowers that take on more than $25,000 in loans after July 1, 2026 will only be able to use the RAP plan to make qualifying payments towards PSLF.
In addition, borrowers that take out loans after July 1, 2027 will not be able to use the economic hardship or unemployment deferments to pause payments if they cannot afford them. In addition, borrowers will only be able to be in many forbearances for up to 9 months during a 2-year period. These new limits on postponing payments in times of financial distress, combined with eliminating $0 payments for new borrowers living in or near poverty, mean that financially distressed borrowers will have fewer options to avoid falling behind and into default.
4. The Big Bill ends most Parent PLUS borrowers’ access to any Income-Driven Repayment plan.
The Big Bill significantly changes Parent PLUS borrowers’ repayment options. Only Parent PLUS borrowers that consolidate their loans before July 1, 2026 and are enrolled in any IDR plan between now and July 1, 2028 will be eligible for an income-driven repayment plan after the SAVE, ICR, and PAYE plans are eliminated on or before July 1, 2028. Those borrowers will be eligible for the Income-Based Repayment (IBR) plan. They will not be eligible for RAP. Existing Parent PLUS borrowers who do not jump through these hoops in time will be locked out of income-driven repayment options, which could make it very difficult to manage their loans if they cannot afford fixed payments.
Borrowers that take on new Parent PLUS loans or consolidate their existing Parent PLUS loans after July 1, 2026 will only be eligible for the new standard repayment plan. If borrowers consolidate or take on Parent PLUS loans after July 1, 2027 those loans will not be eligible for the economic hardship or unemployment deferments and will only be eligible for up to 9 months of many forbearances in a 2 year period. This could mean increased hardship and defaults for low-income Parent PLUS borrowers in the future.
Parent PLUS borrowers should consider consolidating now, before July 1, 2026, and enrolling in the Income-Contingent Repayment (ICR) Plan so that they can preserve their ability to make reduced payments in an IDR plan in the future.
5. The Big Bill Ends the Grad PLUS loan program and creates new limits on how much students and parents can borrow in federal student loans.
The bill ends the Grad PLUS loan program, a type of loan for graduate and professional schools that previously allowed students to borrow up to the full cost of attendance, for any borrowers starting a program on or after July 1, 2026.
The bill also adds a number of new limits on how much students and parents can borrow in federal student loans, with limited exceptions for students that have already borrowed loans and are currently enrolled.
6. The Big Bill makes it harder for borrowers to get relief after their school closes or their school harmed them.
Federal student loan borrowers are entitled to loan cancellation in certain situations where their school engaged in misconduct (the Borrower Defense program) or closed before they completed (the Closed School Discharge program). The bill does not end these relief programs, but does make changes to the program rules that will make it harder for borrowers to access relief. Specifically, in 2022, the Department of Education made improvements to the rules for both of these programs to make it easier for eligible students to receive relief. The Bill makes it so that those rule improvements only apply to loans issued after July 1, 2035. That means that existing loans will be subject to the older rules that make it more difficult for borrowers to get relief.
7. The Big Bill will allow borrowers to rehabilitate loans up to two times to remove them from default.
Currently, borrowers can only use a rehabilitation agreement to remove their loans from default once. Starting July 1, 2027, borrowers will be able to use rehabilitation to exit default twice.
What should borrowers do now?
If you have loans now, little is changing immediately — but you should make sure all of your contact information is up to date on studentaid.gov and with your loan servicers, and keep an eye out for coming changes.
While the bill changes student loan borrowers’ rights, the changes won’t happen immediately – most will not happen until July 2026 or later. For now, borrowers’ repayment options remain the same. However, the Department will likely begin changing its student loan rules over the next year, and those rule changes could impact your loan situation. You should make sure that you are receiving up to date information from the Department of Education and from your student loan servicer.
If you are currently enrolled in the SAVE plan, you should also expect that once that plan is eliminated your monthly payments will likely increase. Consider using the Student Loan Simulator to estimate your monthly payment in Income-Based Repayment (IBR), since that plan will remain available to current borrowers. You may want to begin thinking about whether there are changes you can make to your budget to accommodate a higher monthly student loan payment.
If you already have loans, taking on loans (or consolidating) after July 1, 2026 could make your repayment options worse.
Finally, if you have Parent PLUS loans, consider whether it makes sense to consolidate those loans before July 1, 2026 and enroll in the Income-Contingent Repayment (ICR) plan to preserve your eligibility to make payments based on your income.