The landscape of federal student loan repayment is undergoing significant changes, with new plans set to take effect on July 1. These adjustments aim to simplify the repayment process and provide more affordable options for borrowers. Under Secretary of Education Nicholas Kent has outlined the key modifications, which include the introduction of two new repayment plans and the phasing out of the SAVE plan.
With over 40 repayment and discharge options currently available, the complexity of student loan repayment has become a major hurdle for borrowers. The new plans seek to address this issue by streamlining the options and making repayment more manageable. The changes come as part of the One Big Beautiful Billsigned into law last year by President Donald Trump.
New Repayment Plans: RAP and Tiered Standard Plan
Starting July 1, borrowers will have access to two new repayment plans: the Income-Driven Repayment Assistance Plan (RAP) and the Tiered Standard Repayment Plan. These plans replace the existing SAVE plan, which borrowers will need to transition out of within 90 days of notification.
The RAP plan is designed to prevent negative amortizationa situation where borrowers’ loan balances grow despite making on-time payments. This is achieved through an interest subsidy and principal matching payments. For example, a borrower with a $30,000 initial loan balance would see their monthly payment drop from approximately $341 under the 10-year standard plan to about $262 under the new tiered standard plan, as payments can be spread over 15 years instead of 10.
Key Features of the New Plans
One of the standout features of the new plans is the flexibility they offer in repayment terms. Borrowers can extend their repayment period beyond the traditional 10 years, with options ranging from 15 to 25 years, depending on their loan balance. This extension can significantly lower monthly payments, making repayment more affordable for many borrowers.
Communications regarding these changes have already been sent out to borrowers. Lenders will provide detailed information starting July 1, guiding borrowers through the process of switching to one of the new plans. Borrowers are encouraged to ensure their information is up-to-date with their servicer and to visit studentaid.gov for more details on the available options.
Political Pressures and Borrower Concerns
As the July 1 deadline approaches, there is growing pressure on the Trump administration to address the needs of borrowers who are already eligible for relief under existing federal programs. Over 60 Democratic lawmakers, including Sen. Elizabeth WarrenSen. Jeff MerkleyRep. Ayanna Pressleyand Rep. André Carsonhave urged Education Secretary Linda McMahon to process relief for borrowers eligible through programs like Public Service Loan Forgiveness, Total and Permanent Disability discharge, borrower defense to repayment, and income-driven repayment cancellation.
The lawmakers also expressed concern about the planned transfer of defaulted student loan accounts to the Treasury Department, warning that this could deepen the default problem. They argued that the administration should focus on clearing relief backlogs and extending the collections delay to protect borrowers from harsh collection tools.
Despite these pressures, the Education Department has indicated that broad student loan forgiveness is unlikely. Instead, the focus remains on repayment, lower borrowing limits, and collections reform. The new rule changes, set to take effect on July 1, include the elimination of Grad PLUS for future borrowers, the creation of annual and aggregate loan limits for graduate and professional students, and the establishment of the new Repayment Assistance Plan.
For millions of borrowers, the next few weeks will be crucial. Those in the SAVE plan must choose another repayment option, while borrowers in default seek to avoid wage garnishment or Treasury offset. Additionally, borrowers waiting for various forms of discharge or cancellation, as well as those affected by new borrowing limits, will need to stay informed about the upcoming changes.
