The Trump administration's "Big Beautiful Bill" means big changes to student loans. Here's what current and future borrowers need to know

Washington

The Trump administration has enacted a budget bill that brings substantial changes to the federal student loan system. Key repayment programs, including Pay As You Earn, Income Contingent Repayment, and SAVE, will be phased out by July 2028, with borrowers transitioning to a new Repayment Assistance Plan (RAP) that is expected to increase monthly payments by applying a percentage to the entire adjusted gross income, rather than income above a certain threshold.

Current borrowers will have fewer repayment options and may face higher and longer payments, while new borrowers will encounter stricter borrowing limits, especially for parents and graduate students, and will be limited to just two repayment plans. Existing borrowers who consolidate their loans after July 2026 will be treated as new borrowers, potentially reducing their options. The bill does allow borrowers to rehabilitate out of default twice, up from once previously.

The 'big, beautiful bill's' impact on student loans

From how to pay, to how much can be borrowed, to how to pay it back. The Trump administration's budget bill has a new rule for that. The big takeaways is that borrowers are gonna have fewer options to repay their student loans and they're gonna be paying more, and in many cases, much longer. The sweeping rules the president signed into law make important distinctions between current borrowers and new ones. Here's what you need to know if you're one of the 43 million Americans who currently owe money on student loans. Three repayment programs, the Pay As You Earn, Income Contingent Repayment, and SAVE plans are being phased out by July 2028. And if you're in a SAVE plan, pending litigation could put you back into repayment much sooner. So those borrowers are still going to be sort of waiting and subject to what happens in the litigation. They remain very much in limbo for now. The income-driven repayment plans are expected to migrate to a new one called the Repayment Assistance Plan, or RAP, expected to raise monthly payments. The RAP plan is totally different because they don't carve out any amount of income to meet your basic needs. Instead, they apply a percentage to your entire adjusted gross income. Previous repayment plans only considered income above 150% of the poverty level. There are some upsides. This bill does increase the number of times you're allowed to rehabilitate out of default from one to two. New borrowers will see the biggest changes with more stringent caps on borrowing for parents, graduate students, and professional schools, raising concerns for hopeful law students like Daniel Soria. A lot of the aid that I would have relied on to make it financially viable is no longer going to be available. New borrowers will also be limited to two repayment plans, a standard repayment plan, or RAP. The one other important thing I would flag for existing borrowers is that they will be treated as new borrowers next year if they consolidate their loans. Shafroth's advice? If you're thinking of consolidating your loans, do it before July 2026 to have the most options.

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