OBBA Reshapes Student Loan Repayment
On July 4, 2025, Congress passed the One Big Beautiful Bill Act (OBBA), bringing major changes to federal student loan repayment. The law simplifies repayment plan options, imposes new borrowing limits, and eliminates several current protections. These changes will roll out over the next few years and affect both new and existing borrowers in different ways.
Timeline: When the Changes Take Effect
July 1, 2026: All new federal student loans will be subject to the repayment rules under OBBA.
July 1, 2028: Existing borrowers in the ICR, PAYE, or SAVE plans will be placed in RAP.
Three Repayment Plans Going Forward
OBBA replaces the current array of repayment plans with just three options:
Standard Repayment Plan: A fixed-payment plan amortized over 10 to 25 years, depending on the borrower’s total loan balance.
Repayment Assistance Plan (RAP): An income-driven plan where borrowers pay between 1% and 10% of their adjusted gross income. Monthly payments may be as low as $10, and are reduced by $50 for each dependent. RAP includes full interest subsidies and forgiveness after 30 years.
Income Based Repayment (IBR): An income-driven plan that caps monthly payments at 10% of discretionary income and extends the repayment term up to 20 years. Any remaining balance at the end of the term will be forgiven. NOTE: This option will only be available for borrowers who do not have any new loans after July 1, 2026.
Under OBBA, most current income-driven plans (SAVE, PAYE, REPAYE, and ICR) will be eliminated for new loans after July 1, 2026. Borrowers already enrolled in those plans will be transitioned into RAP by July 1, 2028.
Key Impacts for Borrowers
New borrowers (loans disbursed on or after July 1, 2026) will only have access to the Standard or RAP plans.
Borrowers in SAVE, PAYE, REPAYE, or ICR will be transitioned into RAP unless they switch earlier.
Borrowers eligible for IBR before July 1, 2026 may continue using IBR indefinitely.
Parent PLUS borrowers will no longer be eligible for any income-driven repayment options on loans disbursed after July 1, 2026.
Public Service Loan Forgiveness (PSLF) remains available for borrowers in RAP, but eligibility for other forgiveness paths will be narrower.
Pro Tip:
Knowing your options before you even enter school can help you make a more informed decision for your future.
Other Major Changes
Loan limits: New federal borrowing caps apply, particularly for graduate and professional students.
Deferment restrictions: Economic hardship and unemployment deferments will be eliminated. Forbearance is also more limited.
No new IDR plans: OBBA prohibits new income-driven repayment plans from being created through executive action; future changes must go through Congress.
What Should Borrowers Do?
If you're currently in an IDR plan, especially SAVE, PAYE, or REPAYE, you’ll need to plan ahead for the 2028 transition. RAP may offer affordable payments and long-term forgiveness, but the 30-year term and structure may not suit everyone.
If you’re in IBR, staying in that plan may offer more consistency and flexibility than switching to RAP, depending on your income and loan balance.
If you’re a parent borrower or a prospective graduate student, review the new borrowing limits and plan ahead; your future options may be more limited than in the past.
Know Your Options
The OBBA law marks a turning point in how the federal government approaches student loan repayment. Supporters point to simplification and long-term cost containment. Others are concerned about the loss of flexibility, especially for vulnerable borrower groups.
Regardless of how you feel about the changes, understanding how they affect your situation is critical. A thoughtful strategy now can make a significant difference in your repayment outcomes later. Talk to a Certified Student Loan Professional today to learn more about your options!
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