Student loan legislation passed in July 2025 included changes to federal loan programs. These modifications follow a standard implementation process: negotiated rulemaking develops consensus, changes are published in the Federal Register updating the Code of Federal Regulations (34 CFR Parts 682 and 685), and servicers then incorporate the regulations into their operations. We are currently at the negotiated rulemaking consensus stage, with Federal Register publication and servicer implementation to follow.
Approved Changes to Federal Student Loan Programs
Regulatory Authority: 34 CFR § 682.215 and § 685.221
- Classic IBR (pre-July 1, 2014 borrowers) and IBRNB (post-July 1, 2014 borrowers) can continue on their current plans without forced transitions
- IBR will serve as the default option for borrowers with loans not eligible for the RAP Plan
- Critical Change: Income cap restrictions eliminated - borrowers may now qualify for IBR regardless of income level
- Creates immediate opportunities for high-income borrowers previously excluded from income-driven plans
Impact: Borrowers previously told they earn "too much" for IBR may now qualify. This is especially significant for borrowers in SAVE forbearance who need alternative repayment options.
Regulatory Authority: 34 CFR § 685.209
- PAYE continuation not explicitly addressed in the negotiated rulemaking consensus
- May be subject to general sunset provisions affecting income-driven repayment plans
- Existing PAYE borrowers may need to transition to available options
- Timeline not explicitly specified - will be clarified in implementing regulations
Impact: Current PAYE borrowers should begin contingency planning. Evaluating IBR as a backup option is recommended before any potential forced transitions occur.
Regulatory Authority: 34 CFR § 685.209 (REPAYE provisions)
- SAVE not explicitly preserved beyond July 1, 2026 sunset date for new loans
- Plan currently in forbearance due to ongoing litigation
- Critical Deadline: Existing SAVE borrowers will need to select alternative repayment plans before July 1, 2026
- Existing SAVE borrowers will likely need to transition to either RAP Plan or IBR
- Mandatory transition timeline not specified - awaiting implementing regulations
Impact: Borrowers in SAVE forbearance need an alternative repayment plan before July 1, 2026. IBR, ICR, IBRNB, or PAYE may be options depending on loan portfolio and borrower situation.
Regulatory Authority: New provisions to be codified in 34 CFR § 685
- RAP Plan (Repayment Assistance Plan) becomes available for new borrowers on July 1, 2026
- All existing IDR plans (ICR, IBR, PAYE, SAVE) sunset for loans made on or after this date
- Limited Options: New borrowers will have only two repayment choices: Standard Repayment or RAP Plan
- Represents fundamental simplification of the repayment landscape
- Borrowers with loans before July 1, 2026 retain access to existing IDR plans
Impact: Creates a clear dividing line between "old rules" borrowers (pre-July 1, 2026) and "new rules" borrowers (post-July 1, 2026). Loan disbursement timing becomes critically important for preserving repayment plan options.
Regulatory Authority: 34 CFR § 685.209 (ICR provisions), § 685.221 (IBR provisions)
- Parent PLUS borrowers can currently only access ICR through consolidation
- Will have no access to the new RAP Plan
- ICR will be eliminated on July 1, 2028
- Critical Exception: Parent PLUS consolidation loans being repaid under ICR (or another IDR plan) between implementation and June 30, 2028 will NOT be classified as "excepted consolidation loans"
- These borrowers will be eligible to transition to IBR when ICR is eliminated on July 1, 2028
- IBR offers better terms than ICR (Classic IBR or IBRNB, depending on loan origination date)
Impact: Parent PLUS borrowers have a limited window (now through June 30, 2028) to position themselves for IBR access. This could result in significantly lower payments compared to ICR and represents an unintended but favorable opportunity.
Regulatory Authority: 34 CFR § 685.219, § 685.220
- PSLF program continues with existing 120-payment requirement for qualifying public service employment
- PSLF remains available regardless of whether borrower is on "old rules" or "new rules" repayment plans
- Both IBR and RAP payments will count toward the 120 qualifying payments
- No changes to qualifying employer criteria or employment certification requirements
Impact: PSLF program stability provides certainty for public service workers. The program continues to operate as established, providing loan forgiveness after 10 years (120 payments) of qualifying employment and payments.
Regulatory Authority: 34 CFR § 685.220
- Borrowers who consolidate loans from different time periods (pre- and post-July 1, 2026) create a "mixed cohort"
- Consolidation after July 1, 2026 that includes any post-July 1, 2026 loans converts the entire consolidated loan to "new rules"
- This means loss of access to IBR, PAYE, ICR, and SAVE - only RAP and Standard Repayment available
- Consolidation before July 1, 2026 preserves access to existing IDR plans
- Strategic timing of consolidation becomes critically important
⚠ Reported But Unconfirmed: There are reports that consolidation after July 1, 2026 may erase all previous progress toward forgiveness (months earned toward 120/240/300 payment thresholds). This provision has not been confirmed in official Federal Register publications. Borrowers considering consolidation should wait for final regulations to be published before making decisions that could affect forgiveness progress.
Impact: Borrowers must carefully consider consolidation timing. Consolidating after July 1, 2026 with any new loans triggers conversion to new rules for all loans in the consolidation, potentially eliminating more favorable repayment options. The potential loss of forgiveness progress makes this decision even more critical.
Regulatory Authority: 34 CFR § 685.209, § 685.221 (dual plan provisions)
- Historic Change: For the first time, a single borrower can have two different income-driven repayment plans simultaneously
- Borrowers with pre-July 1, 2026 loans can remain on IBR for those loans
- If the same borrower takes out loans on or after July 1, 2026, those loans must be on RAP
- Both plans will calculate separately based on the borrower's income, but different formulas apply
- This dual-track system has never existed in federal student loan programs before
Significant Structural Change: This creates unprecedented complexity in the federal student loan system. A borrower could be making IBR payments on older loans and RAP payments on newer loans simultaneously, each with different payment calculations, forgiveness timelines, and terms. Borrowers must carefully track which loans are under which repayment plan.
Regulatory Authority: 34 CFR § 682.210, § 682.211, § 685.204, § 685.205
- Unemployment deferments: Eliminated for loans made after July 1, 2027
- Economic hardship deferments: Eliminated for loans made after July 1, 2027
- Forbearance limitations: Reduced to maximum of 9 months in any 24-month period (down from unlimited)
- Restrictions apply only to new loans disbursed after July 1, 2027
Impact: Increased pressure on post-July 2027 borrowers to maintain payments during periods of financial difficulty. Income-driven repayment plans become even more critical as safety net options.
Regulatory Authority: 34 CFR § 682.405, § 685.211
- Increased opportunities: Borrowers can now rehabilitate defaulted loans twice instead of once per lifetime
- New minimum payment: $10 monthly minimum during rehabilitation for loans made after July 1, 2027 (increased from $5)
- Provides additional opportunity for borrowers who re-default after initial rehabilitation
- More forgiving policy for borrowers struggling with default cycles
Impact: Borrowers who have already rehabilitated once and subsequently re-defaulted now have another opportunity to exit default. The $10 minimum payment remains manageable for most borrowers while providing needed flexibility.
Critical Implementation Dates
July 1, 2026
RAP Plan Available & IDR Sunset for New Loans
RAP Plan becomes available. All existing IDR plans (ICR, IBR, PAYE, SAVE) sunset for any loans made on or after this date. Creates "old rules" vs. "new rules" dividing line. SAVE borrowers must transition to alternative plans.
July 1, 2027
Deferment Elimination & Forbearance Restrictions Begin
Unemployment and economic hardship deferments eliminated for new loans. Forbearance limited to 9 months in any 24-month period. Loan rehabilitation minimum increases to $10.
June 30, 2028
Parent PLUS ICR-to-IBR Transition Window Closes
Final opportunity for Parent PLUS borrowers to position themselves for IBR access before ICR elimination on July 1, 2028.
