The Big Beautiful Bill and Federal Student Loan Repayment Options

My summary of the Big Beautiful Bill signed into law on July 4, 2025 as it applies to current borrowers:

SAVE, ICR, and PAYE 

These plans will be phased out as of July 1, 2028. Borrowers can opt into IBR or RAP (Repayment Assistance Plan).  For those currently in SAVE forbearance not accruing interest and not pursuing PSLF, you may wish to stay in SAVE forbearance not accruing interest as long as possible.  Please note that there is still litigation regarding SAVE.  Should the courts find SAVE unlawful, you will be notified by your loan servicer to select a new repayment plan.

Old IBR, New IBR, and RAP 

These are the available Income Driven Repayment (IDR) Plans for Current Borrowers

Old IBR – Is available if you have any federal student loan issued on or before June 30, 2014.

• Monthly payment is 15% of discretionary income or about 13% of AGI.

• 25-year repayment period with forgiveness available.

• Monthly payments capped at the standard 10-year payment amount

  • To reach the payment cap your AGI must be approximately 140% of your original federal student loan balance

• Married Filing Separately is allowed.  This is a consideration if your spouse has no federal student loans.

New IBR – Is available if your federal student loans were issued on or after July 1, 2014.

• Monthly payment is 10% of discretionary income or about 8% of AGI.

• 20-year repayment period with forgiveness available.

• Monthly payments capped at the standard 10-year payment amount

  • To reach the payment cap your AGI must be approximately 140% of your original federal student loan balance

• Married Filing Separately is allowed.  This is a consideration if your spouse has no federal student loans.

RAP – Should be available to most borrowers.

• Monthly payments range from 1% to 10% of Adjusted Gross Income (AGI) depending on AGI.

  • For example, if your AGI is $100,000 or greater, then 10% of AGI.

  • If your AGI is $90,000, then 9% of AGI or $675/month

  • If your AGI is $80,000, then 8% of AGI or $533/month

• 30-year repayment period with forgiveness available.

• Waives unpaid monthly interest (ie, interest subsidy) if your payments are not sufficient to cover the interest due.

• Provides a $50/month payment on your behalf if your payments are not sufficient to cover the interest due.

• A $50 payment reduction for each dependent child.

• Married Filing Separately is allowed.  This is a consideration if your spouse has no federal student loans.

• Once you have enrolled in RAP, you cannot change repayment plan.

It's essential that you conduct thorough research to choose the most beneficial repayment option. Please let me know if I can assist you.

Cheers!