The OBBBA introduces sweeping reforms to, among other things, the federal student loan system which are set to take effect starting July 1, 2026. The law, signed on July 4, 2025, introduces new repayment plans, adjusts borrowing limits, and redefines eligibility for forgiveness through Income-Driven Repayment (IDR) programs. Understanding these changes is critical for making informed financial decisions.

Key Repayment Plan Changes

OBBBA introduces two new repayment plans starting on July 1, 2026 – the new Standard Repayment Plan and the Repayment Assistance Plan (RAP) – and phases out existing IDR plans.

Plan Name Monthly Payments Repayment Period Status Details
New Standard Repayment Plan Based on the borrower’s loan balance and interest rates. The loan balance will determine the repayment term and monthly payment. 10 to 25 years, depending on borrower’s loan balance and interest rates. Starts July 1, 2026 Parent PLUS Loans (consolidated or unconsolidated) are eligible for this plan.
Possible repayment term calculation examples:

  • $25,000 federal student loan balance or less with a repayment term of 10 years
  • $25,000-$50,000 federal student loan balance with a repayment term of 15 years
  • $50,000-$100,000 federal student loan balance with a repayment term of 20 years
  • $100,000 federal student loan balance or more with a repayment term of 25 years
Repayment Assistance Plan (RAP) Based on a percentage of the borrower’s adjusted gross income divided by 12.
$50 will be deducted from monthly payment for any family member or dependent listed on the borrower’s federal tax return.
Lowest minimum payment $10.
Interest subsidy. Matching principal payment up to $50		 30 years Starts July 1, 2026. Based on income, family size, and loan balance over a 30-year term. Parent Plus Loans (consolidated or unconsolidated) are not eligible for this plan.
Income-Based Repayment (IBR) 10-15% of your discretionary income (and your spouse’s if filing jointly).
Never more than federal 10-year Standard Repayment Plan amount.		 25 years (loans taken out before July 1, 2014)
20 years (loans taken out after July 1, 2014)		 Remains available. No new loans disbursed on or after July 1, 2026. This includes consolidation loans.

  • Will be the only original IDR plan available starting July 1, 2028.
  • Consolidated Parent Plus, loans disbursed prior to July 1, 2026, will be eligible for IBR in the future
  • There will not be an income cap requirement in the future.
  • Borrowers who do not have any new loans disbursed on/after July 1, 2026 will have the opportunity to apply for IBR from now until June 30, 2028. If they are not on the IBR plan by June 30, 2028, they will be placed on RAP.
Income-Contingent Repayment (ICR) The lesser of the following:

  • 20% of your discretionary income or
  • What you would pay on a repayment plan with a fixed payment over the course of 12 years, adjusted according to your income
 25 years Only available until June 30, 2028.
*If you do not apply for IBR prior to July 1, 2028, then you will be moved to the RAP.		 Only option for Consolidated Parent PLUS borrowers before IBR eligibility.
No new loans disbursed on or after July 1, 2026. This includes consolidation loans.
Pay As You Earn (PAYE) 10% of your discretionary income (and your spouse’s if filing jointly)
Never more than federal 10-year Standard Repayment Plan amount		 20 years Only available until June 30, 2028.
*If you do not apply for IBR prior to July 2028, then you will be moved to the RAP.		 No new loans disbursed on or after July 1,2026. This includes consolidation loans.

 

Forgiveness & Eligibility Updates

  • Medical and dental residency/fellowship. The OBBBA was updated to allow medical and dental residency/fellowship – assuming employer eligible nonprofit or public service hospital – to count towards the PSLF Program.
  • Parent PLUS Loans:
    • If the loans are consolidated prior to July 1, 2026, and/or on the ICR Plan, they will be able to apply for IBR in the future.
    • Any newly consolidated or unconsolidated Parent PLUS loans will only be eligible for the Standard Plan starting July 1, 2026.
  • Original IDR Plans (e.g. SAVE, ICR, PAYE, IBR):
    • Only IBR remains after June 30, 2028.
    • Borrowers must apply for IBR before July 1, 2028, or default to RAP. This excludes consolidated Parent PLUS loans disbursed prior to July 1, 2026. They will default to IBR Plan.

    New Borrowing Limits Effective July 1, 2026

    • Lifetime federal student loan cap is $257,500 (excludes Parent PLUS and Direct Plus Graduate loans).
    •  Students currently enrolled have a 3-year grace period to complete their program. If not completed during the grace period, they are subject to the new borrowing limits.
    Borrower Type Annual Limit (per year) Limit Cap
    Undergraduate $9,500, $10,500, $12,500 $57,500
    Graduate $20,500 $100,000
    Professional $50,000 $200,000
    Parent (per student) $20,000 $65,000

    Deferment, Default & Rehabilitation

    • Deferment: Economic hardship and unemployment deferments end (starting July 1, 2027).
    • Forbearance: Available in 9-month increments, up to 24 months total (starting July 1, 2027).
    • Default: Loans can be rehabilitated twice with $10 minimum payments (starting July 1,2027). Consolidating out of default will be subject to the new Standard and RAP plans (starting July 1, 2026).

    Have questions? We’re here to help. Contact us at [email protected] or (844) 472-3346. Dial 711 for TTY/TRS. Monday-Friday 9:00am – 5:00pm ET.

    Laurel Road is a private entity, not affiliated with or endorsed by the U.S. Department of Education. We provide an optional free service and do not guarantee results, updates, time frames, or information. This Fact Sheet is for informational purposes. You should consult your tax professional or accounting advisors before taking any actions. Any information provided could change at any time, you should visit studentaid.gov for the most up to date information.