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The Trump Administration’s One Big Beautiful Bill (OBBB) was signed into law on July 4, 2025, and with it, a complex array of student loan changes that can be confusing to decode. It impacts all corners of the federal student loan system, from student and parent borrowing limits to income-driven repayment and loan forgiveness.
Whether you’re an existing borrower or expect to borrow federal education loans in the future, the Trump education policy that piggybacked on the OBBB could affect your access to federal student loan aid and available repayment relief programs.
Here’s what you need to know regarding the new domestic policy bill and how it affects student loans, repayment plans, forgiveness, and more.
Key Points
• Trump’s education policy introduces borrowing caps, fewer repayment options, limited deferment relief, and restrictions on federal aid programs like Pell Grants, PSLF, and PLUS Loans.
• The bill could increase student loan payments by reducing income-driven repayment options and limiting deferment and forbearance relief.
• The bill expands Pell Grant access for short-term training programs, but disqualifies those who receive a full scholarship for that academic year.
• The bill phases out most existing income-driven repayment plans, including SAVE, PAYE, and ICR, replacing them with the RAP plan, which bases payments on AGI.
• To stay ahead of the changes, borrowers can stay up-to-date with DOE news and updates, be proactive with loan management, and may consider refinancing to a private student loan.
What’s in the New Domestic Policy Bill for Student Loans?
The new domestic policy bill — One Big Beautiful Bill — imposes greater borrowing restrictions for some federal student loan borrowers and offers limited options if they can’t make their student loan payments.
Trump education policy changes include caps on federal loan borrowing limits; redefining eligibility markers for programs like the Pell Grant and Public Service Loan Forgiveness; eliminating future access to Grad PLUS Loans and a majority of flexible student loan repayment options; and setting restrictions on parent borrowing for undergraduate students. A provision that restricts borrowers from requesting economic hardship and unemployment deferment relief on loans borrowed after July 1, 2026 is also included in the bill.
Recommended: Trump’s Changes to PSLF: What Borrowers Need to Know
Why the Bill Could Lead to Higher Student Loan Payments
The changes could result in higher student loan payments for many federal student loan borrowers as a whole. Key provisions impacting payments include:
• Phasing out flexible income-driven repayment plans that offer $0 monthly payments for some borrowers.
• Using AGI for Repayment Assistance Program (RAP) payment calculations instead of borrowers’ discretionary income and family size, and a minimum $10 monthly payment regardless of income.
• Fewer and more restrictive student loan relief options, like deferment and forbearance.
How the Bill Could Change Federal Aid and Loan Programs
The 2025 student loan changes under the OBBB are nuanced, sometimes impacting borrowers differently, and at varying timelines, based on when they borrowed their loan or their repayment status. Below are a few standout changes to know about the new Trump education policy.
Pell Grants and Subsidized Loans
The OBBB redefines which students are eligible for the federal Pell Grant. The provision expands access to Pell funding for students who are enrolled in short-term career training programs, which is a benefit for borrowers who are taking an alternative education path. Students who receive a full scholarship are now ineligible for a Pell Grant award in the same academic award year.
Although the domestic policy bill didn’t change the subsidized Direct Loan program, it eliminated the Graduate PLUS Loan program by July 1, 2026. New federal student loan borrowing caps will also be in effect.
| Loan Type | New Annual Borrowing Limits | New Lifetime Borrowing Limits | New Aggregate Lifetime Limit |
|---|---|---|---|
| Subsidized Direct Loans | No Change | No Change | $257,500 |
| Unsubsidized Direct Loans | Graduates: $20,500/year Professionals: $50,000/year | Graduates: $100,000 Professionals: $200,000 | $257,500 |
| Parent PLUS Loans | $20,000/year | $65,000/dependent student | N/A |
As a whole, these eligibility provisions and limits impact how easily students and parents can access federal loan assistance, and might hinder college affordability for postgraduate students and families of undergraduates.
Recommended: What Is the Cost of Attendance in College?
Income-Driven Repayment Programs
Many of the existing income-driven repayment (IDR) programs — including the newest Saving on a Valuable Education (SAVE) Plan from the Biden-Harris era — are affected by the current administration’s domestic policy bill. As of August 1, 2025, interest began accruing on loans that were under the SAVE Plan forbearance. SAVE is expected to be eliminated by July 1, 2028. Borrowers can, however, switch to another eligible income-driven repayment plan.
The OBBB kept the Income-Based Repayment (IBR) Plan with some modifications. By July 1, 2028, the SAVE Plan, Pay As You Earn (PAYE) Plan, and Income-Contingent Repayment (ICR) Plan — which is the only income-driven plan currently available to Parent PLUS Loan borrowers — will be terminated. The provision also eliminates the Graduated and Extended Plans.
In their stead, a new income-driven option, the Repayment Assistance Plan (RAP), was created. Instead of using discretionary income and family size to determine monthly payments as its predecessors did, the RAP calculates monthly payments using borrowers’ adjusted gross income (AGI) and offers only a $50 payment reduction per dependent. RAP also extends the repayment period to 30 years (compared to 20 or 25 years on IDR plans, currently). The RAP isn’t available to Parent PLUS Loan borrowers.
Another 2025 student loan change from the OBBB is a modified Standard Plan for loans borrowed on or after July 1, 2026. Instead of a 10-year repayment period, the modified Standard Plan is designed with a 10- to 25-year period, based on the total amount you’ve borrowed. Both the RAP and modified Standard Plan could keep student loan borrowers in repayment longer. Keep in mind, though, that by staying in repayment longer, borrowers will end up paying more in interest over the life of the loan.
The repayment plans you can access depend on your loan status and when your loans were disbursed.
• For borrowers currently in repayment: Borrowers can generally remain on their existing plan, including the old IBR Plan, at least through July 2028.
• For new federal loans borrowed before July 2026: Borrowers can enroll their loan in the modified Standard Plan, RAP, or new IBR.
• For new federal loans borrowed after July 2026: Borrowers can enroll their loan in the modified Standard Plan or RAP.
Ultimately, these sweeping changes streamline the number of federal loan repayment options from seven down to just two. Borrowers are left with fewer options to choose from, and could face higher monthly payments under the remaining plans.
Forgiveness Application Backlogs
The OBBB doesn’t explicitly call out changes in processing timelines for loan forgiveness. However, the Department of Education’s “reduction in force” in March 2025, IDR Plan court actions, and the tapered revamp of qualifying repayment plans might present further delays in processing loan forgiveness applications.
What You Can Do to Stay Ahead of These Changes
The Trump administration’s domestic policy bill has many moving pieces when it comes to the federal student loan program. Here are a few ways to feel more prepared as provisions of the OBBB are implemented.
Be Proactive with Loan Management
Although no immediate student loan action is required from federal student loan borrowers, it might make sense to act sooner than later. For example, borrowers currently enrolled in SAVE can choose to switch to the old IBR Plan — which bases payments on discretionary income and family size — rather than being automatically moved to the RAP plan, which calculates payments using adjusted gross income (AGI).
Learn more in our Student Debt Guide.
Stay Up to Date with Education Department News
Keeping a pulse on the 2025 student loan changes can help you stay informed as new details are released. One way to get the latest Education Department news is to subscribe to its newsletter and follow updates on the Ed Dept Newsroom.
The Education Department might directly send you key information and updates that affect your loans. For example, the Department of Education is reaching out to approximately 7.7 million borrowers who are on the SAVE Plan with next steps on how to switch repayment plans.
Ensure that the contact information on your loan accounts is up to date so you don’t miss crucial changes and timelines.
Consider Locking in a Private Refi Rate
As federal student loan repayment options shrink, some borrowers might explore student loan refinancing. Refinancing your federal student loans entails moving your federal education debt to a private lender. If you’re looking for ways to lower your monthly payment, locking in a lower private refinancing rate might be an option, if you qualify.
However, proceed with caution. Refinancing federal student loans cuts you off from accessing federal benefits, like student loan forgiveness and income-driven repayment.
Recommended: Should I Refinance My Federal Student Loans?
The Takeaway
The federal student loan landscape is about to look considerably different than it does today. These student loan changes could make monthly payments rise for federal student loan borrowers, and might make it more challenging for future low-income students and families to afford a college education.
Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.
FAQ
Will Trump’s education policies raise student loan payments?
Yes, Trump’s education policy changes could increase payments for many borrowers by ending income-driven repayment plans like SAVE, PAYE, and ICR, and replacing them with the new RAP plan, which may result in higher costs for low-income borrowers.
What is in the new domestic policy bill that could affect student loans?
The OBBB limits Direct PLUS Loan limits for graduate students and parents, tightens annual and aggregate borrowing limits on Direct Loans, eliminates most existing income-driven repayment plans, and limits repayment plan options for future federal loan borrowers, among other changes.
Could income-driven repayment plans change under new proposals?
Yes, income-driven repayment plans have been overhauled entirely, with the exception of the IBR plan, which incurred minor modifications. By July 1, 2028, the new RAP plan will be the only available IDR plan for new Direct Loans.
How might Pell Grants or federal loan forgiveness programs be impacted?
The new legislation altered Pell Grant eligibility to include short-term training programs, but restricts access to students who receive full scholarships for the academic year. Federal loan forgiveness programs are impacted by the restructuring of income-driven repayment plans. Borrowers who take out Direct Loans on or after July 1, 2026 can only access the RAP plan, which offers forgiveness after 30 years instead of 20 or 25 years through current IDR plans.
What can student loan borrowers do to prepare for policy changes?
The full implementation of President Trump’s domestic policy bill as it relates to student loans is expected by July 1, 2028. In the meantime, borrowers can keep their student loan account information updated, take note of key timelines for certain changes, and stay on top of notifications from the Education Department.
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