(Finally) Reviewing Changes to Student Loans - 2025 Edition

Hey everyone,

America is taking a hit with the One Big Beautiful Bill Act (OBBBA). But when it comes to student loans, I prefer to call it Other Bullshit Brought By Assholes because it phases out many existing income-based repayment plans, including the SAVE plan, which many folks already switched to.

You know, sometimes time feels like a circle. It's just more expensive with every loop :/

What OBBBA Changes — What’s New, What Ends, and When

Change	What OBBBA Does	Effective Date / Deadline
Elimination of older Income Driven Repayment plans (SAVE, PAYE, ICR)	These will no longer be options once the transition is complete. Borrowers will be funneled into RAP. (Nerd's Eye View | Kitces.com)	July 1st, 2028
Introduction of the Repayment Assistance Plan (RAP)	RAP will be one of the two repayment paths for most borrowers going forward. Payments are based on Adjusted Gross Income (AGI) instead of discretionary income. Additionally, includes interest subsidies for unpaid interest, has a $10 minimum monthly payment, dependent reductions, and a longer forgiveness timeframe. (Student Loan Planner) Unfortunately for most, AGI is often greater than discretionary income, resulting in larger payments overall compared to other income-based repayment plans.	July 1st, 2026
Changes to Standard Repayment Plans	Alongside RAP, there will be a standard plan for those who don’t want or aren’t eligible for RAP. Terms depend on how much you owe. (Nerd's Eye View | Kitces.com) Previously, Standard repayment was made over 10 years, but now scales based on the loan balance. Payment schedules are 10 years for balances under $25,000, and they max out at 25 years for loan balances over $100,000. Only the 10-year plan qualifies for PSLF ….though this is meaningless in most cases since PSLF requires 10 years' worth of qualifying payments, which would pay off the loan before any forgiveness is received.	July 1st, 2026

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The Lopsided Pros and Cons

Pros:

Cons:

Simpler to compare options since there are fewer of them. Expanded ‘standard’ repayment options. No need for partial financial hardship to apply for IDR. Anyone can apply.

More limits for borrowing. Graduate students limited to $100k total in federal student loans. Parent PLUS Loans will now have an annual cap of $20,000 and total cap of $65,000 per student. Undergrad borrowing limits remain unchanged, thankfully. New borrowers after July 1st, 2026, can only pay under the Standard repayment plan or RAP. RAP requires 30-years of repayment before loan forgiveness kicks in. Those additional payments will, in most cases, outweigh the benefits of a lower tax bomb at forgiveness. ·       All PSLF-compliant repayment plans will increase. o   Typically, PAYE and SAVE offered the best repayment plans for PSLF. With only IDR, RAP, and 10-year standard plan remaining after July 1st, 2026, payments will increase compared to previous strategies.

When should you (or should you even bother to) switch repayment plans?

• If you are enrolled in PAYE or SAVE plans:

  • Compare your current plan payments versus Income-based repayment (IBR) plan payments.

    • IBR payments are 15% of discretionary income for borrowers before 2014 and 10% for borrowers after 2014.

  • Calculate proposed RAP payment beginning in 2028.

    • This requires a bit of estimation of your income for 2028. If uncertain, use the Adjusted Gross Income on your most recent tax return.

    • Click here to use a calculator to determine what your RAP payment would be.

  • See if lower SAVE or PAYE payments justify staying in them until July 1^st, 2028, and then being forced into RAP.

    • If not, switch to the IBR plan before July 1^st, 2026.

  
  

• If you are already enrolled in the IBR plan

  • Don’t do anything! This plan will likely be the most affordable.

  
  

• If you are pursuing Public Service Loan Forgiveness (PSLF):

  • Switch to IBR before it’s inaccessible to new borrowers starting July 1^st, 2026, ideally as soon as possible.

    • This will get you back to making qualifying payments bringing you closer to loan forgiveness….for now.

    • There are concerns about what will qualify for PSLF in the future, but few details exist at this moment.

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My less colorful thoughts on the OBBBA. For both the student loan provisions and all the other awfulness lodged in there.

Overall, I don’t like most of the changes. The biggest factor is that, overall, payments are increasing during a time when discretionary income is decreasing. Until there is a regime change, however, the best course of action is to get out of PAYE or SAVE repayments before July 1^st, 2026.

If, after reading all of this, there’s still confusion, reach out to me! I’ll explain the differences between the different repayment plans and, hopefully, provide a little clarity in these chaotic times.

Until then, stay safe, everyone!