2 hours ago 1

What student loan repayment will look like after Trump's budget bill

As of 2025, 42.5 million people have outstanding federal student loans. Of those, approximately 12.3 million — about 29% of borrowers — are currently enrolled in an income-driven repayment (IDR) plan. These plans provide significant relief, giving borrowers more affordable monthly payments.

However, President Trump's One Big Beautiful Bill (OBBB) overhauled federal student loans and their repayment options. The changes will have a major impact on both current and future student loan borrowers. And, depending on what loans you have, you may have a limited amount of time to take action — or risk losing repayment options permanently.

The OBBB made sweeping changes, but when they go into effect varies by provision. Whether you have existing loans or plan on taking out loans in the near future, here's what you need to know.

1. It creates a new standard repayment plan

Who it affects: Any borrower who takes out a federal student loan on or after July 1, 2026
When it goes into effect: July 1, 2026

The current loan system's standard repayment plan requires fixed monthly payments over 10 years. The OBBB scraps that design and introduces a tiered repayment schedule based on borrowers' loan balances.

The new standard repayment plan applies to borrowers who take out a new loan — even if they have existing federal loans — on or after July 1, 2026.

Who it affects: All undergraduate and graduate loan borrowers
When it goes into effect: July 1, 2026

The bill creates a new repayment plan, the Repayment Assistance Plan (RAP). Unlike the current IDR plans, the RAP requires all borrowers — regardless of income or dependents — to make payments of at least $10 per month. The new plan bases payments on the borrower's income (minus $50 for each dependent).

For example, say your AGI is $45,000 per year and you have one child. Your payment would be set at 4% of your income or $1,800 per year ($150 per month). But, because you have a dependent child, your payment is reduced by $50 per month, so your monthly payment amount would be $100.

The RAP waives interest that accrues if your payment amount doesn't cover the full amount, but borrowers will be in repayment for 30 years.

Who it affects: Undergraduate and graduate loan borrowers who take out loans on or after July 1, 2026
When it goes into effect: July 1, 2026

Borrowers who take out new loans will have just two repayment options.

"Any borrower who takes a loan on or after July 1, 2026, will only have access to the new standard and RAP repayment plans," said Scott Buchanan, executive director of the Student Loan Servicing Alliance.

New borrowers won't have access to today's IDR plans, extended repayment, or graduated repayment.

4. Current undergraduate and graduate borrowers will transition to new plans

Who it affects: Undergraduate and graduate loan borrowers with existing loans
When it goes into effect: July 1, 2028

Legacy undergraduate or graduate borrowers — meaning those with existing loans — have a bit more time before they need to change their payment plans. As long as you don't take out any new loans on or after July 1, 2026, you can continue under any of the following repayment plans for the time being:

Income-Contingent Repayment (ICR)
Income-based Repayment (IBR)
Pay As You Earn (PAYE)
Saving on a Valuable Education (SAVE)
Extended repayment
Graduated repayment

However, the OBBB will phase out most of these options over time, and all borrowers in discontinued payment plans will be required to enroll in a new plan — either IBR, the new RAP, or the new Standard Repayment plan — by July 1, 2028.

Who it affects: Borrowers who take out new Parent PLUS Loans on or after July 1, 2026
When it goes into effect: July 1, 2026

Under the current system, Parent PLUS Loan borrowers can consolidate their loans with a Direct Consolidation Loan and qualify for an ICR repayment plan (and if they work for an eligible employer, they can qualify for Public Service Loan Forgiveness).

The OBBB eliminates those features; anyone who takes out a new Parent PLUS Loan on or after July 1, 2026, will only be eligible for standard repayment. Parents can't qualify for alternative payment plans or PSLF.

"[Parent borrowers] will not be eligible for RAP or other old repayment plan options," said Buchanan.

"Keep in mind: The new standard plan will flex monthly payments based upon the balance of the loan, offering a lower monthly payment over a longer period for larger balances, which is different from the old standard plan that was set at a 10-year term regardless of balance.”

Who it affects: Current parent loan borrowers
When it goes into effect: July 1, 2026

Parent PLUS Loan borrowers will no longer be eligible for alternative payment plans. For existing borrowers, only those who consolidate their debt by July 1, 2026, and enroll in an IDR plan will have access to alternative payment plans.

If you have not yet consolidated your loans, you must complete the process before June 30, 2026.

"Any Parent PLUS borrower who consolidates or takes out new loans on or after July 1, 2026, would only have access to the standard plan," said Adam Minsky, a student loan attorney.

Who it affects: All student loan borrowers
When it goes into effect: July 1, 2026

For borrowers who cannot afford their payments, consolidating with a Direct Consolidation Loan could provide some relief. It gives some borrowers access to repayment plans they wouldn't otherwise qualify for, and some borrowers can qualify for 30-year terms and get more affordable payments.

Although Direct Consolidation Loans will still exist in the future, the OBBB reduces their usefulness.

"Consolidation will be an option, but one with very little practical value for most borrowers going forward after July 1," said Buchanan.

The new RAP and standard repayment plan have longer repayment terms. And consolidating on or after July 1, 2026, will cause legacy borrowers to lose access to alternative payment plans.

The OBBB completely changed federal financial aid and repayment options, and details are still forthcoming on some updates. For example, the ICR plan will be eliminated, but the deadlines borrowers must meet are unclear.

"We will publish more information about the ICR enrollment deadlines that borrowers must meet before ICR is eliminated in order for them to continue to be able to access the IBR Plan," the Department of Education said on the Federal Student Aid announcement site.

As you adjust to these changes, check in with the announcement page for the latest details. And if you need help understanding your loan options or enrolling in a different repayment plan, contact your loan servicer.

Read Entire Article