Millions of student loan borrowers in the United States are set to receive significant financial relief as the Department of Education finalises major changes to key repayment programmes. The overhaul aims to make monthly payments more manageable by expanding access to income-driven plans and introducing a new, potentially cheaper option.
Key Changes to Income-Based Repayment (IBR)
The adjustments primarily focus on the Income-Based Repayment (IBR) plan. In a major shift, the government has removed the requirement for borrowers to prove a partial financial hardship to qualify. This rule change, reported by CNBC, opens the door for higher-income earners who were previously excluded, potentially expanding the plan to millions more.
Under the revised IBR rules, borrowers will typically pay 10% of their discretionary income each month. For certain older loans, this percentage rises to 15%. Mark Kantrowitz, a noted higher education expert, explained to CNBC that this change allows many higher earners to now reduce their monthly payments significantly.
IBR is one of several income-driven repayment (IDR) plans created by Congress decades ago. These plans cap monthly payments at a portion of a borrower's discretionary income and promise forgiveness of any remaining debt after 20 or 25 years. The Department of Education has instructed loan servicers to hold applications that would have been denied under the old rules until the new system is fully in place.
New Repayment Assistance Plan (RAP) Offers Lowest Payments
Starting July 1, 2026, borrowers will have access to a brand new plan called the Repayment Assistance Plan (RAP). This is another IDR option that leads to debt forgiveness after 30 years. According to Betsy Mayotte, President of The Institute of Student Loan Advisors, RAP could offer the lowest monthly payment for many due to its extended timeline.
These changes coincide with the phasing out of older IDR plans like the Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans, which will end on July 1, 2028. Mayotte assured borrowers currently in these plans that they can switch to IBR or RAP without losing any progress already made toward loan forgiveness.
What Borrowers Should Do Next
The Department of Education is encouraging all federal student loan borrowers to actively explore their repayment options. Several online calculators are available to help compare estimated monthly payments under IBR, RAP, and other plans. Borrowers are advised to use these tools and consider switching plans if it leads to lower bills.
With the Trump administration implementing these updates, the landscape of student loan repayment is becoming more accessible. The combination of simplified eligibility rules and the introduction of new plans promises broader access to affordable monthly payments for a vast number of Americans burdened by education debt.
