The Trump administration’s 2025 reforms are reshaping how millions of Americans will repay their federal student loans. These changes, enacted through legislation and administrative rulemaking, introduce new repayment options, limit borrowing for graduate and professional students, and phase out several existing programs. This article provides a clear, non-political breakdown of the updates and what they mean for current and future borrowers.
Key Changes to Student Loan Repayment
- Phasing Out Existing Income-Driven Repayment (IDR) Plans
Plans like SAVE, PAYE, and REPAYE are being gradually phased out. Borrowers who currently use these programs may retain access temporarily but will eventually be required to transition to new options.
- Introduction of the Repayment Assistance Plan (RAP)
The new Repayment Assistance Plan (RAP) will become one of the two main repayment options. Key features include:
- Payments between 1% and 10% of discretionary income (minimum $10 per month).
- Forgiveness available after 30 years of repayment.
- Unpaid interest may be waived under certain conditions.
- Standard Repayment Option
Borrowers can also choose a simplified standard repayment option, based on loan balance plus interest. This structure replaces the multiple older repayment choices.
- New Borrowing Caps for Graduate and Professional Students
Graduate borrowing is capped at $20,500 per year (up to $100,000 lifetime). Professional degree programs are capped at $50,000 per year (up to $200,000 total). Grad PLUS loans are being eliminated, requiring students to seek other funding sources.
- Transition Timelines
- Borrowers with loans issued before July 1, 2026 may keep older plans temporarily.
- By 2028, most existing borrowers will need to transition to new repayment structures.
- Suspension and Processing Delays
In 2025, applications for IDR and forgiveness were paused and later reopened. However, processing remains delayed, with over a million applications pending.
- Resumed Enforcement of Collections
The Department of Education has resumed wage garnishment and tax refund offsets for borrowers in default, increasing the urgency to remain current on payments.
What Borrowers Should Do
- Review your current repayment plan carefully.
Many existing income-driven repayment (IDR) plans (such as SAVE, PAYE, IBR, REPAYE) are being phased out for new borrowers.
If you remain in one of those plans, check whether—and when—you’ll need to switch to a new plan (such as RAP or a standard plan).
- Track key transition deadlines, especially for loans taken out before July 1, 2026.
Borrowers who took out loans before July 2026 may have “grandfathered” access to certain repayment plans, but many will still face mandatory transitions in future years.
New borrowers after that date will be limited to just two repayment plan options: a “standard” plan or the new Repayment Assistance Plan (RAP).
- Prepare for potentially higher payments or longer repayment under RAP if income is low.
Under RAP, payments are pegged between 1% and 10% of discretionary income.
Forgiveness under RAP will only occur after 30 years of qualifying payments.
Because the payment period is extended, total interest paid may increase compared to shorter-term plans.
- Expect and monitor administrative delays and backlogs.
The Education Department is already processing a backlog of IDR and Public Service Loan Forgiveness (PSLF) requests.
Implementation of new rules under RAP and related adjustments may create processing delays, particularly for borrowers applying for forgiveness or switching plans.
- Reassess your graduate / professional degree borrowing strategy.
Under the new law, Grad PLUS loans will be eliminated for new borrowing after July 1, 2026.
Graduate borrowing will be capped: $20,500 per year and $100,000 lifetime for most master’s level work.
For professional degrees (e.g. law, medicine, etc.), limits will be higher: e.g., $50,000 per year and $200,000 lifetime in some cases.
Because loan limits are more constrained, it may be more important to plan alternative funding (scholarships, employer support, tuition payment plans) for parts of advanced education.
- Stay alert to changes in deferment, forbearance, and default rules.
The new law proposes to remove or limit certain deferment options (such as for economic hardship or unemployment) for loans disbursed after specified dates.
The law also introduces new rules for defaulted borrowers, including expanded opportunities to rehabilitate the loan more than once.
If you are in or near default, explore rehabilitation or consolidation options sooner rather than later.
- Document your qualifying payments now.
Because many plans, forgiveness pathways, or transitions require proof of qualifying payment periods, keep your statements, tax returns, and servicer correspondence intact.
If you worked in public service or nonprofit sectors, preserve documentation of employment that qualifies for PSLF or similar forgiveness paths.
- Consult a financial counselor or student-loan expert for your specific case.
The transition is complex. What’s optimal (for example, whether you should switch early to IBR or wait for RAP) depends on your income trajectory, loan balance, profession, and how soon forgiveness may apply.
FAQ
Q: Do these changes affect private loans?
No, they apply only to federal student loans. Private loans are managed by banks, credit unions, or other lenders and follow different rules.
Q: Will any loans be forgiven automatically?
Forgiveness is available under RAP after 30 years of qualifying payments, not through immediate cancellation. Borrowers may also qualify for forgiveness sooner if they meet the requirements of programs like Public Service Loan Forgiveness (PSLF).
Q: Can existing borrowers stay in their current plan permanently?
No, most will eventually need to transition to new repayment options. However, borrowers may choose from several federal repayment plans, including income-driven repayment (IDR) plans, depending on eligibility.
Q: Are forgiven amounts taxable?
That depends on future tax law. Under current rules, forgiven amounts may be treated as taxable income. However, through 2025, federal tax law exempts most federal loan forgiveness from taxation, though state tax rules can vary.
Q: What happens if I miss a payment?
Missed payments may lead to delinquency or default if not addressed, but income-driven repayment plans are designed to make payments more affordable and help prevent long-term issues.
Q: Can I switch repayment plans later?
Yes, borrowers can usually change repayment plans. Switching may reset progress toward forgiveness in some cases, so it’s important to review the impact before making changes.
Q: Do these repayment changes affect Parent PLUS loans?
Parent PLUS loans are not always eligible for the same repayment options. Some programs require consolidation into a Direct Consolidation Loan before qualifying for income-driven repayment.