The Republican-led policy bill cuts repayment plans to two options for future borrowers.
The Republican-led “One Big Beautiful Bill” was signed into law by President Donald Trump last week, which will result in major changes to student loans, including fewer repayment options, caps on borrowing and new rules for Pell Grants.
The nearly 900-page bill means a lot of changes for taxes and Medicare, but its impact on higher education could alter how colleges operate and burden borrowers with education debt for much longer than expected, experts said.
“This could create a situation where borrowers are in repayment for a longer period, and overall costs could be higher [when] repaying under this plan,” said Elaine Rubin, a student loan policy expert and director of corporate communications at Edvisors.
Existing borrowers may retain access to the Income-Based Repayment plan, but anyone who borrows after July 2026 will be subject to the new rules. Millions of SAVE borrowers may be forced onto the new plans when the administrative forbearance period ends.
Here’s how it could affect your student loans and long-term finances.
Read more: If You’re a Student Loan Borrower Enrolled in Save, Make This Move Now While Your Payments Remain Paused
What are the new student loan repayment plans in the budget bill?
The Republican-led bill consolidates student loan repayment options into a standard repayment plan and the Repayment Assistance Plan. Any student loans borrowed after July 1, 2026, will be restricted to these two repayment plan options.
1. Standard repayment plan
The current standard repayment plan spans 10 years. The new standard plan will expand the repayment window to 10 to 25 years, depending on the amount of debt:
Standard repayment plan tiers
| Amount of debt | Repayment term |
|---|---|
| Less than $25,000 | 10 years |
| $25,000 – $50,000 | 15 years |
| $50,000 – $100,000 | 20 years |
| Greater than $100,000 | 25 years |
A longer repayment plan could mean more affordable monthly payments, but you’d be in debt longer and pay more interest overall. Consider this example of a $40,000 loan with a 6.53% interest rate.
Standard repayment plan costs
| Repayment term | Monthly payments | Total interest costs |
|---|---|---|
| Current standard plan (10 years) | $455 | $14,576 |
| New standard plan (15 years) | $349 | $22,839 |
2. Repayment Assistance Plan
The new Repayment Assistance Plan will replace all current income-driven repayment plans and adjust your payments to 1% to 10% of your adjusted gross income, with a minimum monthly payment of $10.
You’ll have to pay 1% of your AGI if you make between $10,000 and $20,000, 2% if you make $20,000 to $30,000, 3% for $30,000 to $40,000 and so on. Borrowers who make less than $10,000 will pay $10 per month, and those who make $100,000 or more will pay 10%.
Your loan payments are applied to interest first, then fees and finally toward principal. The RAP plan includes an interest waiver, so if your monthly payment doesn’t cover the amount of interest that accrues that month, the unpaid interest is waived. That could help alleviate the frustrations with the old student loan repayment plans (except for SAVE), which potentially allowed unpaid interest to increase the balance even when borrowers made on-time payments.
Additionally, the bill includes minimum principal balance reduction of $50 each month. So if your monthly payment is $100, but $60 is going toward interest and fees, you’d only be paying $40 toward your principal balance. The government would chip in the remaining $10 so you’d reach the $50 threshold.
Monthly payments would go down by $50 per dependent, so if you have a $250 loan payment and two kids, you’d pay $150 a month on the RAP plan. If you have a $100 student loan payment, you’d only have to pay the minimum $10 a month.
“Borrowers may benefit from the changes,” Rubin said. “As dependent children can directly impact their payment, it could create a more affordable monthly payment, however, it will have these borrowers locked in repayment for a longer period.”
The RAP has a longer timeline than current income-driven repayment plans — 30 years versus 20 or 25, which is how you could end up paying a lot more for a lot longer.
“I worry that we will be increasing the population of the elderly still holding student debt,” said Betsy Mayotte, president and founder of the Institute of Student Loan Advisors. “Longer debt can impact things like home purchase, the cost of other credit and, of course, retirement.”
What changes can current student loan borrowers expect?
Under the new plan, current borrowers may have the option to move to the new plans or move to the Income-Based Repayment plan.
Existing borrowers (loans taken before July 1, 2026) will have access to a version of the current IBR plan, paying either 15% of their discretionary income with forgiveness after 25 years or 10% with forgiveness after 20 years, depending on when they took out the loan.
Millions of borrowers enrolled in Saving on a Valuable Education (the SAVE plan) are still waiting for resolution after the courts struck down the plan. Borrowers’ payments are paused while their loans remain in a general forbearance, but it’s unclear when payments will restart. However, whichever plan they end up moving to will likely result in higher monthly payments and a longer repayment period.
Let’s go back to that example of a $40,000 loan at a 6.53% interest rate. Assuming you’re a single filer with an annual income of $60,000, here’s what your monthly payments and repayment timeline could look like on the current plans and the RAP:
SAVE vs. new repayment plans
| Repayment plan | Monthly payments | Time in repayment | Total paid |
|---|---|---|---|
| SAVE (at 10%) | $207 | 25 years | $62,100 |
| IBR (borrowed before July 1, 2014) | $457 | 25 years | $137,100 |
| IBR (borrowed after July 1, 2014) | $304 | 20 years | $72,960 |
| RAP | $250 | 30 years | $90,000 |
“In terms of the provisions of the RAP plan, there will be winners and losers,” said Robert Farrington, student debt expert and founder of The College Investor. “While the 30-year timeframe is longer and could make overall costs more expensive for some, other borrowers benefit from the interest and principal subsidies.”
While your monthly loan payment may go down on RAP, depending on your income, the longer time frame could create an obstacle for your long-term financial goals. If you graduate at 22, you could end up with student loan payments until you’re 52. Plus, you’ll end up paying more in interest over time.
According to an analysis by the Student Borrower Protection Center, the new RAP could cost the typical SAVE borrower an extra $2,929 per year.
“This is akin to indentured servitude,” said Mark Kantrowitz, a student loan and financial aid expert. It “mostly affects borrowers who are living below or near the poverty line for decades, which is more than half of the borrowers in an income-driven repayment plan.”
If you’re a current borrower and don’t choose a new repayment plan by July 2, 2028, you’ll be automatically enrolled in RAP.
Parent PLUS borrowers who aren’t already on an ICR plan are excluded from all income-driven repayment options.
What other student loan changes are in the budget bill?
The Republican legislation includes several other changes to student loans. Here are some of the major ones.
Option to exclude spouse’s income
Married spouses who file separate tax returns got a bit of a break: The Senate’s so-called “marriage penalty” was nixed from the final version. When calculating AGI for use in RAP, payments for married borrowers won’t be based on both spouses’ incomes if they file taxes separately. Spouses who file jointly will need to include both incomes.
End of deferment and forbearance
The new plan eliminates deferment for economic hardship for loans made after July 2027. It also reduces the forbearance time frame to nine months over a 24-month period.
Currently, borrowers can request economic hardship deferment for up to three years and forbearance for 12 months over a three-year period.
Reduced borrowing limits
Beginning July 2026, the bill restricts borrowing to $50,000 for undergraduates, $100,000 for graduate programs and $200,000 for professional programs. The bill also caps Parent PLUS loans at $65,000 and eliminates Grad PLUS loans.
These new limits may reduce college access for some students, according to Kantrowitz.
“The loan limits may affect low- and middle-income students who are enrolled at high-cost colleges, where the federal loan limits might not be enough,” he said. “They may have to rely on private student loans, which might not be available.”
Mayotte also says she’s concerned about the reduction in loan availability.
“If the cost of tuition doesn’t go down, we end up with a lot of students that reach their max federal loan eligibility and then don’t qualify for private loans to finish their degree,” Mayotte says. “Having debt and no degree is one of the biggest indicators of default within the student loan portfolio.”
Pell Grant limitations
The new bill prevents students from receiving Pell Grants if they received enough scholarship money to cover their cost of attendance. Critics of the bill said Pell recipients who have scholarships to cover the cost of attendance often use the grant money to pay for everyday expenses such as transportation, housing and food.
However, the current enrollment rules for Pell Grants remains intact. The House version had raised the bar for how “full-time” studies are defined — students would have to earn 30 credits per year to be eligible, for instance, rather than the current 24. The Senate nixed this change, and the revision remained in the final bill. The final bill also expands the Pell Grant to short-term job-training programs.
School accountability
The final bill calls for federal aid to be linked to school performance, tying a school’s federal aid access to its students’ earnings after graduating the program.
