Income-Driven Repayment Is Changing Under Trump

If you have federal student loans, you currently have several repayment plan choices. However, the One Big Beautiful Bill Act is making major changes to student loan repayment. Some of those changes go into effect this year.

One of the biggest changes is that many of the current income-driven repayment plans are being phased out. Borrowers will have to explore different options for debt relief through an income-driven plan starting later in 2026.

Here's what to know about the changes. 

Many Income-driven Student Loan Repayment Plans Are Disappearing 

For borrowers who need student loan debt relief, income-driven repayment is usually one of the best options. That's because, unlike many other kinds of debt, federal student loans can't typically be settled for less than you owe, and it is difficult to discharge them in bankruptcy. You typically have to find some way to pay.

Income-driven repayment plans are a good option if you're struggling with federal student loans. These federal plans are not for private student loans, which are treated differently and have different rules. These plans cap federal loan payments at a percentage of your income. This cap is aimed at making monthly payments affordable even if your earnings aren't high. 

After you pay for your loans for a certain time (such as 20 to 25 years), you may also qualify for student loan forgiveness on an income-driven plan. If you qualify, any remaining balance you owe after paying for the required time is eliminated.

Under the current rules, the income-driven repayment plans available to borrowers include:

• Income-Based Repayment (IBR): This caps monthly student loan payments at 10% of discretionary income if you first borrowed after July 1, 2014, and 15% if you first borrowed before that date. After 20 years of qualifying payments, your balance is forgiven. 

• Income Contingent Repayment (ICR): This income-driven plan caps payments at 20% of discretionary income, and you qualify for forgiveness after 25 years.

• Pay as You Earn (PAYE): This caps payments at 10% of discretionary income, and offers forgiveness after 20 years of qualifying payments. 

There is also a SAVE Plan that was more generous to students, but it was blocked by the courts. Also, those who work for a nonprofit or for the government could qualify for Public Service Loan Forgiveness after 10 years of making payments on an income-driven plan while working for an eligible employer.

Many of the current income-driven plans are disappearing, though. 

Changes depend on type and age of loans

Borrowers who only took out loans prior to July 1, 2026, will keep their access to the above plans until July 1, 2028. After July 1, 2028, borrowers with loans from before July 2026 will have a choice of two payment plans: IBR, or a new plan called the Repayment Assistance Plan. 

Any borrower with pre-2026 loans who wants to keep IBR will have to sign up for it before July 2028. Borrowers can also still keep working toward Public Service Loan Forgiveness.

Borrowers who have any loans from after July 1, 2026, will have different rules. (That includes modifications to existing loans, such as consolidation.) They will have to choose from the standard repayment plan or a new Repayment Assistance Plan (RAP). 

Parent PLUS borrowers face a more complicated landscape, and will in most cases be limited to the standard repayment plan. 

A New Income-Driven Repayment Plan Is Being Introduced 

If you’re managing student loan debt, note that the new income-driven plan may be your only option for income-driven repayments as a new borrower. Existing borrowers can also switch to it if they want to.

The new plan, called the Repayment Assistance Plan (RAP), sets a minimum $10 per month payment, regardless of your income. Your specific payment amount depends on what you earn. Here is how much you’ll pay:

• $10 per month if your Adjusted Gross Income (AGI) is below $10,000. Adjusted Gross Income (AGI) is your total gross income minus specific deductions, or adjustments that the IRS allows (like student loan interest and contributions to retirement plans)

• 1% of your AGI if that income is between $10,001 and $20,000

• 2% of AGI if it is between $20,001 and $30,000

• One additional percentage point for each $10,000 in income, up to a maximum of 10% for income above $100,000

If your monthly payment doesn’t cover your interest costs, any unpaid interest amounts are waived. You'll also get up to $50 from the government applied to your principal. This means even if you are paying very little, your balance will go down over time. 

Your monthly payment will also be reduced by $50 for every dependent you claim when you file your taxes. For example, if you have two children, you would take $100 off the payment amount. However, no matter how many dependents you have, you would not pay less than $10 per month toward your loans.

At the end of 30 years on the RAP Plan, if you haven't paid off your student loans in full, any remaining balance should be forgiven.

Current Borrowers Need to Act to Preserve Their Options

The changes to income-driven repayment plans simplify the process, since borrowers now don't have as many plans to choose from. You'll either be on the standard plan or on RAP if you are a new borrower after July 1, 2026.  

Potential savings are a mixed bag. For some borrowers, some borrowers may have higher payments while others see payments decrease. It depends on income and which of the previous plans you would have selected.

However, if you have had your loans since before July 1, 2026 and you wish to stay on the IBR plan instead of switching to the RAP Plan in July of 2028, be aware of the deadline: You must sign up for the new version of the IBR before July 1, 2028.  Current Parent PLUS borrowers, unless they can take advantage of a complicated loophole, will only have access to the standard repayment plan.

Choosing the Right Student Loan Payoff Plan Is Essential

It's worth your time to pick the right repayment plan. That's because, unlike many other kinds of debt, federal student loans usually can't be discharged in bankruptcy. The balance also can't be reduced through debt settlement in most cases.

Federal student loans are treated differently under the law, and lenders have much more power to collect if you don't pay. As a result, lenders aren't usually willing to work with you if you get into trouble. Programs like income-driven repayment could help you avoid falling behind on your loans.

If you're struggling with what you owe, explore student loan repayment options and consider switching to an income-driven plan. If you have other debts that are making it harder to pay your student loans, also consider exploring ways to make paying those other loans easier—debt consolidation or debt settlement could help. 

By keeping up to date on changes to your loan payoff options and prioritizing your student debt, you may find a payment solution that works well for you.