Multiple Changes
Student loans have been a hot topic over the past few years, especially recently, as the Trump administration passed the One Big Beautiful Bill Act (OBBBA) in 2025. This is in addition to all the things we saw in the news about student loan forgiveness by the Biden administration not too long ago during the pandemic. Even me, as a financial professional, has had moments of confusion about all of the back and forth we have seen, but I wanted to provide this resource so that people can use it to better understand exactly what is happening with their existing loans.
As of August 1st 2025, most repayment plans for borrowers have restarted accruing interest. Even though some of the repayment plans do not require monthly payments to be made yet, because of court rulings, the balance of your loans is most probably increasing as interest is being charged again. While most borrowers had the luxury of not having to make regular payments for a significant period of time, it’s important to check the status of your loans and see where they stand
This information is intended for those who already have taken loans out and have left the college system. There were multiple changes made that impacted those who are yet to go to college and will be new borrowers, but those will not be covered here
Simplified Repayment Options
For all new borrowers (As of July 1, 2026), there will be just 2 types of repayment plans to choose from, a standard plan and a new program called the Repayment Assistance Plan (RAP)
For all existing borrowers, they will have access to some of the existing repayment plans, but must transition to either an Income-Based Repayment (IBR) plan, or the new RAP by July 1, 2028. If a borrower doesn’t proactively update their payment plan, they will be automatically reassigned to one of the two programs
1. Standard Plan
These work kind of like a mortgage, where the payments remain consistent while you work to pay it off, because the payments have been amortized over a period of 10 to 25 years depending on your loan balance
$24,999 or less – 10 Year term
$25,000 – $49,999 – 15 Year term
$50,000 to $99,999 – 20 Year term
$100,000 or more – 25 Year term
2. Repayment Assistance Plan (RAP)
RAP is a new repayment plan introduced by the OBBBA which makes your monthly payment amount dependent on how much income you earn. Here is a breakdown of that income chart
| Income Range | % of Adusted Gross Income (AGI) |
| ≤ $10,000 | $10/month minimum |
| $10,001 to $20,000 | 1% |
| $20,001 to $29,999 | 2% |
| $30,000 to $39,999 | 3% |
| $40,000 to $49,999 | 4% |
| $50,000 to $59,999 | 5% |
| $60,000 to $69,999 | 6% |
| $70,000 to $79,999 | 7% |
| $80,000 to $89,999 | 8% |
| $90,000 to $99,999 | 9% |
| $100,000 ≥ | 10% (cap) |
The RAP will also lead to student loan forgiveness, but after a period of 30 years, compared to the typical 20 or 25 year timeline on other income driven repayment plans. However, those eligible for Public Service Loan Forgiveness (PSLF) will still have their loans forgiven after 10 years.
For those borrowers who claim dependents on their tax return, they can deduct $50 a month for each dependent claimed.
On this plan, if your payment does not cover the accruing interest or reduce your principal by at least $50, the difference in interest will be waived. For example, if your monthly payment is $100, but the interest is $200, the government will waive the $100 difference.
If your monthly payment doesn’t reduce your principal by $50, the government will cover the difference so your principal balance decreases by at least $50. If your payment decreases the principal by more than $50, you will not get any benefit
**Borrowers on SAVE, PAYE, or ICR must choose between RAP or IBR by July 1, 2028 or risk being automatically placed into the Standard Plan, which could result in much higher monthly payments.
Summary
The One Big Beautiful Bill Act marks a major shift in how student loans work. For some people, it will simplify things, while for others, it will cause them to have to shift things around.
Just know you are not alone in this changing landscape. With the right knowledge and support, you can navigate these changes and make smart decisions for your financial future! Here is a link to the official student aid website where you can use their simulator to see your specific situation and a starting point for which makes most sense for you
Still Have Questions?
If you want to dive deeper into your student loans and build a plan to help pay them off, schedule a free call so we can discuss your situation.
Disclosure
This content is provided for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. No advisory relationship is created by reading this article. Investment advisory & financial planning services are offered only pursuant to a written agreement through Noor Financial Services, a Registered Investment Adviser. Please consult with a qualified professional regarding your specific financial situation.
