Major changes to federal student loans will begin July 1, with most prospective federal student aid applicants facing only two repayment plan options from that day forward. The new plans replacing PAYE and ICR plans are a tiered Standard Repayment Plan and the income-driven Repayment Assistance Plan (RAP). Borrowers currently on PAYE or ICR plans will have until July 1, 2028, to transition to one of the new plans.
Repayment Plan Details
The Standard Repayment Plan, which currently lasts 10 years, will be modified to allow borrowers to pay a fixed monthly payment, based on the loan amount instead of income, over a period of 10 to 25 years. Lower-income borrowers could choose the Repayment Assistance Plan and pay a lesser percentage of their adjusted gross income, capped at 10%. Any remaining loan balance after 30 years would be forgiven.
The government would also waive the loan interest portion for RAP plans if on-time monthly payments do not cover interest, ensuring that borrowers who make regular payments don’t see their outstanding balance go up. Additionally, July 1, 2026, begins a 90-day countdown for the roughly 7.5 million borrowers currently enrolled in the Biden administration’s now defunct SAVE plan.
Impact on Borrowers
Those loan holders must transition to either the Income Based Repayment plan – which will only be available for loans taken out before July 1, 2026 – or one of the two new repayment plans. Otherwise, they will automatically be placed on one of the new plans. Republicans argue that the new plans will not only save the federal government $278 billion by 2034 but also simplify and streamline the federal student loan borrowing and repayment process.
Democratic opponents and higher-education groups have criticized the post-graduate borrowing caps, arguing they will impact a large group of students wanting to continue with specialized degrees. The changes are a result of congressional Republicans’ “One Big Beautiful Bill,” also known as the “Working Families Tax Cuts Act,” that became law last year.
Original reporting: KTBS 3 (Shreveport) — read the source article.
