Income-Driven Repayment Plans

The Most Sweeping Student Loan Overhaul in Decades As of July 2025, the “One Big Beautiful Bill”officially reshapes how students borrow, repay, and manage federal student loans, including major changes to Parent and Grad PLUS loans, borrowing caps, and repayment options. From the elimination of multiple repayment plans to new annual and lifetime loan limits, this legislation marks the biggest federal aid shift in our lifetimes. Whether you’re a enrollment management professional, student support administrator, policy advocate, or borrower you’ll want to understand what’s changing and how it may impact your institution or your own personal wallet. 1. Fewer Repayment Plans All existing income-driven repayment options: SAVE, PAYE, IBR, ICR are being retired Beginning July 1, 2026, the system condenses to two plans: * Standard Repayment: 10–25 year term, fixed monthly installments * Repayment Assistance Plan (RAP): payments tied to income (1–10% of AGI), with a minimum $10/month payment and 30 years to forgiveness 2. Transition Timeline: * New borrowers (post–July 1, 2026) must choose between Standard or RAP * Current borrowers have until July 1, 2028 to transition off the retiring plans 3. New Borrowing Caps: Strict annual and lifetime limits apply starting July 1, 2026: * Graduate loans: max $20,500/year, $100,000 total * Professional degrees (med, law): max $50,000/year, $200,000 total * Parent PLUS: capped at $20,000/year, $65,000 per child 4. No More Hardship Deferment: Unemployment or economic hardship deferments will no long be available. However, borrowers in default can now rehabilitate twice (increase from prior of once) Institutions should begin coordinated efforts now to align with this new federal loan environment: *Review your financial aid packaging models to reflect new borrowing caps, especially for graduate, professional, and parent borrowers. *Enhance financial literacy and counseling to help students and alumni understand their repayment options and long-term impacts. *Train compliance and aid teams to ensure adherence to updated federal guidelines as they phase in over the next two years. *Engage enrollment and academic leadership to assess potential programmatic and enrollment shifts especially in fields most impacted by reduced federal borrowing power. *Strengthen alumni outreach to offer support for those transitioning out of legacy repayment plans before the 2028 cutoff. This moment calls for coordinated leadership across financial aid, compliance, enrollment management , alumni relations and academic affairs. The changes are real and the time to prepare is now. If there was ever a time to break down the silos in your institution, now is that time. As I always say, let’s lead with clarity, compassion, and strategy.

I have a new op-ed in The Washington Post on the Repayment Assistance Plan: a brand-new student loan repayment system that will help borrowers get out from under their debt faster. Standard student loan repayment plans may carry high monthly payments, amounts that are often difficult for young people to afford at the beginning of their careers when their earnings are lowest. In the past, the government has addressed this problem with income-driven repayment plans, which tie payments to earnings. But this can reduce payments below accrued interest, so borrowers who keep up with their payments can still see their balances rise. While RAP preserves the income-contingent nature of previous plans — payments still rise and fall with the borrower’s earnings — but it includes safeguards to prevent rising balances. If a borrower’s payment doesn’t fully cover interest, RAP waives any remaining interest. The government also credits principal balances up to $50 for each on-time payment. The upshot is that if borrowers keep up with their payments, RAP guarantees they will pay down their balances over time. For example, consider a borrower whose payment is $50 but faces monthly accrued interest of $125. Under a normal repayment plan, their balance would rise by $75 every month. Under RAP, the unpaid $75 in interest is waived. The government also matches her $50 payment and applies it as a credit to her principal. Instead of rising, this borrower’s balance falls by $50. This isn’t loan forgiveness, but it does ensure that borrowers who make a good-faith effort to tackle their loans can pay down their balances faster. According to my analysis for the American Enterprise Institute, a typical college graduate using RAP will repay her loans in full after just 11 years. Under a previous income-driven plan, such a typical borrower would carry the debt for 20 years before getting it forgiven at public expense. Read the full op-ed: https://lnkd.in/e__idSpq

If you work in healthcare, especially as a PA, NP, CVP, or MD, and have federal student loans, the “Big Beautiful Bill” signed on July 4th includes major changes that will reshape how you repay, refinance, or even qualify for forgiveness. Here’s what you need to know: 1. PSLF isn’t gone, but it’s not the same. Public Service Loan Forgiveness still exists. But starting in 2026, the Secretary of Education will have the authority to exclude certain employers from qualifying, especially nonprofits tied to immigration, LGBTQ+ youth, and social justice work. That means working at a 501(c)(3) may no longer be enough. 2. PSLF forgiveness could be taxable after 2025. Forgiven balances are currently tax-free under the American Rescue Plan Act—but only through December 31, 2025. If Congress doesn’t extend this, your forgiven balance in 2026 and beyond could become ordinary taxable income. 3. Income-Driven Repayment (IDR) plans are being phased out. SAVE, PAYE, IBR, and ICR will all be eliminated for new borrowers starting July 2026. Instead, you’ll have just two choices: • A standard fixed plan (10–25 years) • A new “Repayment Assistance Plan” (1–10% of income, forgiveness after 30 years) 4. Loan limits are shrinking. Graduate and professional students will face strict new federal loan caps—a major shift for those entering med school, PA/NP programs, or anesthesia training after July 2026. Parent PLUS and Grad PLUS loans are also getting cut. 5. Deferments and forbearances are getting harder to access. Unemployment and hardship deferments will disappear for future borrowers. Forbearance will be capped at 9 months every 2 years. This is the most sweeping change to student loans in a generation, and it may hit hardest in the healthcare world, where graduate debt is common and PSLF is often the light at the end of the tunnel. If you’re unsure how this affects you, or you’re graduating in the next 2 years, don’t wait! These changes aren’t coming… they’re already here.

the department of education is banking on the fact that most students  won't notice the difference between what they said was happening and  what's actually starting july 1. if you're reading this, you're already ahead. here's the breakdown that  will actually help you decide. if you're in the SAVE plan: your action timeline you have a 90-day window starting july 1 to pick a new repayment plan. here's what you're comparing: 📍 RAP (Repayment Assistance Plan): the new income-driven option monthly payment: 1-10% of your adjusted gross income (depending on loan type and dependents) forgiveness: after 30 years the catch: you have to stay on autopay to shield against interest accrual. miss a payment and interest starts accumulating again. best for: people whose income is volatile or low relative to their debt, people planning to stay in repayment for a long time 📍 Standard Plan: monthly payment: fixed amount, same every month timeline: 10 years (or up to 30 if consolidated) the catch: predictable doesn't mean affordable. if your income is $35k and your monthly payment is $600, this plan doesn't care. best for: people with manageable debt-to-income ratios, people who want to pay it off fast 📍 Legacy Plans (PAYE, IBR, ICR): only if your loans were disbursed before july 1, 2026 these phase out july 1, 2028, so you have two years to be on them before choosing something else PAYE is historically the most generous (10% of discretionary income, forgiveness after 20 years) but this is a countdown. don't treat it as your permanent plan. 🎓 the move: use the federal student aid loan simulator at studentaid.gov before mid-september. input your actual income, debt, and family situation. compare projected payments and total cost across all your options. pick the one that lets you actually make payments.

Student debt in 2025: New policies, new realities The federal student loan system is in the midst of its biggest transformation in decades. With the Trump administration’s One Big Beautiful Bill Act (OBBB) now law, the Repayment Assistance Program (RAP) is set to become the only Income-Driven Repayment (IDR) option for borrowers. Our latest research—drawing on data from over two million households—offers a first glimpse into how these sweeping changes are reshaping the landscape for borrowers and the federal government alike. Key insights  — IDR eligibility shifts slightly: 5% of previously eligible borrowers lose access, while a similar number of low- and middle-income borrowers gain it.  — Payment changes: Low- and high-income borrowers will see payments rise by about 2% of income; middle-income borrowers experience little change.  — Debt reduction for low-income borrowers: RAP’s new subsidies mean low-income borrowers’ balances drop 28% after 10 years, compared to a 46% increase under prior policy.  — Federal revenue up: Projected to rise 5% over pre-pandemic levels, and up to 28% if universities pay for the new monthly subsidies. Emerging challenges:   — Overdue payments rising: Since payments resumed, overdue payment rates have normalized, but slightly above pre-pandemic levels, with higher-income borrowers increasing the most (up 45% vs. 2019).  — Not just hardship: Overdue borrowers are likely to be financially secure than before the pandemic. However, over 75% haven’t made a single payment since the COVID pause ended—pointing to administrative hurdles and communication gaps, not just financial distress.  — Wage garnishment risk: Defaulted borrowers may have their wages garnished. Our data show that many overdue borrowers could lose half their discretionary income to wage garnishment, and nearly 1 in 10 overdue borrowers may be forced to cut essential spending. Why it matters:  RAP is designed to steadily reduce balances and boost government revenue, but even modest payment increases could stretch the lowest-income borrowers. The surprisingly high number of overdue borrowers seems to driven by something beyond financial hardship, like confusion and administrative issues. Clearer communication and targeted support are more important than ever, especially as wage garnishment returns. Bottom line:  Student debt repayment is evolving fast. Policymakers, borrowers, and universities need to stay sharp—opportunities and risks are both on the rise. 👉 Read the full reports to dive deeper into these findings and learn more about what’s next for student debt. #StudentDebt #RAP #IDR #HigherEd #Policy #FinancialSecurity #OBBB https://lnkd.in/e-npY6By Daniel Sullivan Lucas Nathe Samantha Anderson

Starting today, student loan borrowers can sign up for the new Repayment Assistance Plan (RAP), which makes some big changes to income-driven repayment. Our Dec 2025 report walks through the changes and uses our unique data to estimate how borrowers might be affected. We found that 1. The share of borrowers eligible for RAP will be similar to pre-SAVE IDR plans. 2. Payments for low- and high-income IDR enrollees will increase by about 2 percent of income, while they will change by less than 1 percent in either direction for middle-income borrowers. 3. Debt balances for low-income IDR enrollees will decrease much faster under RAP, due largely to the new interest and principal subsidies. 4. Gross revenue to the federal government will be 5 percent higher relative to before the pandemic. Read the full report here: https://lnkd.in/e5_2Xh8t