Major Student Loan Repayment Changes Ahead: What Borrowers Need to Know and Do Now

Big changes are coming to federal student loan repayment plans following recent updates from the budget reconciliation bill. Borrowers can start preparing today to stay on track for affordable payments and potential forgiveness.

Urgent Priorities for Borrowers

Here’s what we recommend you do today:

1. If you have Parent PLUS loans:
   • Consolidate as soon as possible.
   • Enroll in ICR now to protect your eligibility for income-driven repayment plans and PSLF.
   • Borrowers who consolidate now will gain access to the more affordable IBR plan in 2026, a major benefit.
   • If you ever want to access any income-driven repayment plan or qualify for Public Service Loan Forgiveness (PSLF), you must consolidate your Parent PLUS loans and enroll in ICR before July 1, 2026.
2. If you are working towards Public Service Loan Forgiveness, stay the course. PSLF eligibility remains intact.
   If you work for a qualifying non-profit or government employer, have Federal Direct Loans, and are making payments under an eligible repayment plan (PAYE, IBR, or ICR), tax-free loan forgiveness is still available after 10 years of public service.
   
3. If you are pursuing loan forgiveness, and on the SAVE plan, switch. If you want to reach loan forgiveness as quickly as possible, borrowers on the SAVE plan need to switch to a qualifying income-driven repayment option. Complete the Income-Driven Repayment Plan Request Form and choose a qualifying plan to get on track. 
   • If you are pursuing PSLF: PAYE, ICR and IBR are qualifying repayment plans.
   • If you’re pursuing income-driven loan forgiveness: only IBR is eligible.
   • Linking directly to the IRS can speed up application completion and processing time.
4. Stay informed about plan transitions starting in 2026. Borrowers on PAYE, ICR or SAVE will eventually need to transition to IBR or the new Repayment Assistance Plan (RAP). If your loans remain in good standing, these more favorable repayment plans may be grandfathered until July 2028. Until then, choosing the most affordable plan (PAYE, IBR, or ICR) now will save money and maximize forgiveness opportunities.

• PAYE & ICR will phase out between July 2026–2028. Borrowers on these plans will need to switch to either IBR or the new Repayment Assistance Plan (RAP). 
• RAP is replacing everything except IBR. RAP will feature tiered payments based on your adjusted gross income (AGI) and your family size (e.g., $50/month credit for each dependent child). Minimum payments will start at $10/month. IDR forgiveness terms will extend to 30 years.

• Parent PLUS loan limits are changing. Lifetime borrowing will be capped at $65,000 lifetime and $20,000 per dependent annually. These were previously up to the cost of attendance.
• Grad PLUS loans will be eliminated. New borrowing caps for Stafford loans will be $100,000 for graduate students and $200,000 for professional students.
• New borrowers (excluding Parent PLUS) on or after July 1, 2026, will only have access to RAP for an income-driven repayment option. IBR is only going to be available to borrowers with loans disbursed before July 2026. Those that choose RAP will be locked in for the life of the loan. 

We know changes like these can feel overwhelming. The good news is you still have time to make changes and position yourself for the most affordable repayment and maximum forgiveness. By taking action now you can stay in control and avoid costly surprises later.

If you need help understanding your options or navigating the process, our student loan coaches are here to guide you every step of the way.