Key takeout
Many federal student loan borrowers will need to change their repayment plans over the next three years, which will increase monthly costs for millions of people.
The “big, beautiful bill” signed by President Donald Trump will revamp and simplify the student loan repayment system for future borrowers. It also forces millions of existing borrowers who have received loans by July 1, 2026 to move to another repayment plan.
How will the bill change the repayment planning system?
Currently, all borrowers are listed in standard repayment plans. This will result in the borrower being 10 years to pay his debt balance on comparable payments. If borrowers need to lower their monthly payments, they have the option to switch to one of four income-driven repayment plans: income-based repayment, valuable education payments, income organization repayments, or savings on valuable education plans.
“Big and Beautiful Invoice” phases PAYE, ICR, and SAVE plans. As of July 1, 2028, these three plans will no longer be available to borrowers.
Instead, borrowers have only two income-driven options: an IBR plan or a newly created repayment support plan.
The RAP plan available to borrowers from July 1, 2026 is a new income-based plan that uses a different method to calculate payments. The payments for borrowers registered on the RAP plan are between $10 per month, 10% of their adjusted gross income (AGI), with a percentage that climbs when income is obtained.
Additionally, the RAP plan allows borrowers to deduct $50 a month for all dependent children. RAP also raises the amount of time borrowers need to pay back before obtaining loan forgiveness in 30 years, from 20 or 25 years under the current income-driven repayment plan.
Does this bill affect you?
If you are currently registered for PAYE, ICR, or Retention, your invoice must move to a standard repayment plan, IBR, or RAP by July 1, 2028.
It is important to note that the bill is only necessary for borrowers in the affected plan to choose another option. Any borrower or IBR plan currently belonging to the standard plan can remain there.
How will my payment change?
The “big and beautiful bill” increases payments for many existing borrowers with an income-driven repayment plan, but depends on the borrower and their balance.
The bill adds $3,694 to what the average save borrower pays over his lifetime, according to estimates from the University of Pennsylvania’s Wharton School.
The 1.3 million borrowers currently registered with PAYE have a fairly similar formula for both plans, so if they register with IBR, their monthly payments won’t increase much. However, according to Investopedia’s calculations, RAP plans can be between $60 and nearly $170 more per month than the average borrower’s PAYE.
For most borrowers, ICR plans always have the most expensive monthly payments. However, for almost 1.2 million borrowers currently employed in ICR, Investopedia’s calculations show that the average borrower will have a lower payment in both IBR and RAP.
How will payments change under the invoice? Wrap Ibr Paye ICR Save Average Single Borwer $534.21 $472.00 $472.00 $585.00 $374.33 Spouse and 2 children and average borrower $434.21 $266.00 $266.00 $584.00 $64.955 $64.95
What happens if you do nothing?
Currently, borrowers who have not taken action by July 1, 2028 and have registered their plans in a recurring income plan that has moved will be automatically transferred to the RAP plan after that date.
However, there are a few exceptions. By June 30, 2026, borrowers who have consolidated their parent plus loans or consolidated their loans multiple times will not be eligible for the RAP plan. If these borrowers do not move their plans by July 2028, they will be automatically transferred to the IBR plan.
