Federal student loan repayment is undergoing a massive overhaul. Starting July 1, President Trump’s Working Families Tax Cuts Act will replace the confusing web of old income-contingent programs with two simplified choices designed to lower balances and make monthly bills more manageable.
New Repayment Options
The two new options—the Repayment Assistance Plan and the Tiered Standard repayment plan—offer direct financial benefits to borrowers, including targeted interest waivers and matching principal payments. The Repayment Assistance Plan scales monthly bills to match a borrower’s actual earnings, with payments set between 1 and 10 percent of a person’s income, depending on how much they make.
To provide further relief for families, the government reduces that monthly bill by an additional $50 for every dependent the borrower claims. One of the biggest changes under the Repayment Assistance Plan takes direct aim at runaway interest. Federal student loan portfolio data shows that three out of four borrowers currently in income-driven plans owe more money six years into repayment than they originally borrowed.
This happens because their monthly payments fail to cover the accumulating interest. The Repayment Assistance Plan ends this cycle by completely waiving any remaining unpaid interest each month, as long as the borrower makes their required payment on time. The program also introduces a matching principal payment to guarantee that loan balances actually shrink.
Tiered Standard Plan
For those who prefer a predictable, fixed repayment schedule rather than an income-based one, the new Tiered Standard plan offers a sliding scale tied to the total amount borrowed. Instead of forcing everyone into a standard 10-year window—which often creates impossibly high monthly bills for those with larger debts—the new setup assigns 10, 15, 20, or 25-year terms.
Borrowers taking out new student loans will have immediate access to both programs on July 1. Those who already hold loans issued before that date have a longer window to navigate the transition. Existing borrowers currently enrolled in phased-out repayment plans have until July 1, 2028, to choose between the Repayment Assistance Plan, the Tiered Standard plan, or an Income-Based Repayment option.
Original reporting: Tampa Free Press — read the source article.
