Senate Bill Overhauls Student Loan Repayment Plans

The Senate’s final version of the One Big Beautiful Bill was released last night, and it introduces a complete overhaul of student loan repayment – for both existing borrowers and new borrowers. This comes after last minute changes removed some key provisions GOP lawmakers wanted.

For new borrowers who take out student loans after July 1, 2026, they will only have two options: a new Standard Plan, or an income-driven repayment plan called the Repayment Assistance Plan (RAP). Furthermore, new borrowers will face lower student loan borrowing limits and changes to loan types.

For existing borrowers, there will not be immediate changes, but between July 2026 and July 2028, the income-contingent repayment plans (ICR, PAYE, and SAVE) will be eliminated, and borrowers will have to migrate to a modified version of Income-Based Repayment (IBR).

This changes will have a dramatic effect on both how families pay for college, as well as how they repay their existing student loan obligations.

Changes For New Student Loan Borrowers

For students who take out student loans after July 1, 2026, there are changes in both the student loan limits, and the repayment plan options available.

While undergraduate borrowing limits remain the same, there will be new limits on Parent PLUS loans of $20,000 per year, per student, and $65,000 overall.

Graduate students face the elimination of Grad PLUS Loans, which previously had no limit. Graduate students will have the current $20,500 annual limit, and a $100,000 lifetime, while professional students will have the $50,000 annual limit and $200,000 lifetime.

For current graduate students, there is a three academic year grace period to use the current Grad PLUS Loans if you’ve already borrowed one before June 30, 2026.

On the repayment side, new borrowers will only have access to two plans: a standard plan that provides level payments over a set period of time, and the new income-based Repayment Assistance Plan (RAP).

The standard plan will based the repayment timeline on how much the student loan is:

• 10 Years: $25,000 or less
• 15 Year: $25,001 to $50,000
• 20 Year: $50,000 to $100,000
• 25 Year: $100,001 or More

The RAP Plan bases your student loan payment on your adjusted gross income. Monthly payments start as low as $10, and rise to a maximum of 10% of your AGI if you make over $100,000 per year. Borrowers will receive a $50 monthly discount per each qualifying dependent.

There are several benefits, including the fact that unpaid interest does not accrue, and if your loan payment does not put at least $50 towards your principal each month, you’ll see your principal reduced by $50 automatically. And the balance will be forgiven after 360 qualifying payments (30 years).

Changes For Existing Borrowers

The new law would require the migration of existing income-driven repayment plan borrowers into a modified version of Income-Based Repayment. Between July 1, 2026 and June 30, 2028, the Secretary of Education is to eliminate Income-Contingent Repayment, Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE), along with any associated forbearance.

The SAVE plan will likely end well before the 2028 deadline anyway.

Borrowers in those plans would be forced into one of the available options. And if they don’t make a selection, the would automatically move into IBR or RAP, depending on eligibility.

Under the modified IBR plan, for loans issued before June 30, 2013, borrowers will pay 15% of discretionary income and be eligible for forgiveness after 25 years.

For loans issued on or after July 1, 2014, borrowers will pay 10% of discretionary income, with forgiveness after 20 years. Discretionary income continues to be defined as income above 150% of the federal poverty level.

Borrowers with qualifying payments made under PAYE, SAVE, or ICR prior to transitioning into RAP will be allowed to count those payments toward forgiveness under the new plan.

Parent PLUS Loan Borrowers

The updated Senate bill continues to exclude Parent PLUS Loan borrowers from affordable repayment plans. New Parent PLUS Loans made after July 1, 2026 will only be available to be repaid under the new Standard Plan.

Existing Parent PLUS Loan borrowers have some pathways to continue to have access to income-driven repayment. If they consolidate their loan by June 30, 2026 and begin payment under ICR, they can migrate to the Amended IBR between July 1, 2026 and June 30, 2028.

Parent PLUS Loan borrowers who have already consolidated or double-consolidated and are repaying on any income-driven plan will be able to migrate to the Amended IBR as well.

Less Deferment And Forbearance Options

Finally, the Senate bill removes two key deferment and forbearance options: economic hardships and unemployment deferments will end. The premise is that borrowers in financial difficulty should be steered towards RAP or IBR.

There will be a discretionary forbearance offered, but it will be capped at nine months for every 24-month period.

What Happens Going Forward

The Senate is expected to vote on the bill this weekend, and then it will go back to the House of Representatives. Once the House votes on the bill, it will head to the President’s desk. The goal is to have the bill signed into law before July 4.

This bill will be a major change for student loan borrowers. Changing loan repayment for nearly all borrowers, while also limiting loans for those attending college.

There will also be a lot of key deadlines that borrowers will need to know so they aren’t left in a situation they cannot afford.