Millions of Americans with federal student loans are facing sweeping changes after former President Donald Trump signed the One Big Beautiful Bill Act in July 2025. This new law marks one of the most significant overhauls of the U.S. student loan system in decades, dismantling existing income-driven repayment (IDR) plans and replacing them with a more limited set of repayment options.
Experts warn that the law could lead to higher monthly payments for many borrowers, with some expected to pay thousands more per year. The legislation also tightens borrowing limits, phases out forgiveness programs, and restores aggressive collection powers to the federal government.
Rising Costs for Millions of Borrowers
According to the Student Borrower Protection Center (SBPC), the financial burden on borrowers will increase significantly:
- College graduates could see an average increase of $2,929 per year
- Borrowers with some college but no degree may pay an additional $1,761 annually
- Families of four led by a graduate could experience a $2,808 rise in annual payments
This comes at a time when more than 5.8 million borrowers—roughly one-third of all federal student loan holders—are already delinquent on their payments.
Simplified Choices, but at a Higher Cost
The law replaces the SAVE Plan, IBR, PAYE, and ICR programs with just two options:
- Repayment Assistance Plan (RAP) – This new plan is income-based, requiring borrowers to pay between 1% to 10% of their income, with a minimum monthly payment of $10. However, loan forgiveness is only granted after 30 years, and deferment options are limited.
- Standard Repayment Plan – Offers fixed monthly payments over a 10–25-year term, without income adjustments or any forgiveness benefits.
Borrowers enrolled in previous IDR plans must transition to one of the new options by July 1, 2028, or they will be automatically reassigned to a new plan.
Typical Borrowers to Pay More Annually
The SBPC estimates highlight the financial toll of these changes:
| Borrower Category | Estimated Annual Increase |
|---|---|
| Degree-holding individual | $2,929 |
| Some college, no degree | $1,761 |
| Family of four (degree-holder head) | $2,808 |
Many borrowers who previously paid $0 per month under the SAVE Plan—due to low income—will now face substantial monthly payments.
Lifetime Loan Limits Introduced
The law introduces strict lifetime borrowing caps across key categories:
| Loan Type | Lifetime Cap |
|---|---|
| Graduate Students | $100,000 |
| Medical/Law Students | $200,000 |
| Parent PLUS Loans | $65,000 per child |
Additionally, the Graduate PLUS Loan Program will be phased out, and Pell Grant eligibility rules will become more restrictive starting in 2026. These developments could lead many students to rely on private loans, which typically offer less protection and higher interest rates than federal loans.
Borrower Protections Rolled Back
The new law also scales back important safety nets:
- Only two forbearances allowed for the lifetime of a loan
- Deferment for hardship or unemployment has been eliminated
- Loan forgiveness under RAP now takes 30 years
- Only two loan rehabilitations allowed for defaulted loans
Additionally, borrowers on paused SAVE plans will see interest resume on August 1, 2025, affecting around 7.7 million people.
Analysts predict that up to 1.8 million borrowers could default by mid-2025 as a result of these policy shifts.
Consequences of Non-Payment
The legislation reinstates the government’s ability to:
- Garnish wages
- Seize tax refunds
- Deduct Social Security and federal benefits
These powers were previously limited or paused but are now fully restored under the new bill. Borrowers in default face severe financial penalties, making repayment compliance more critical than ever.
A Growing Option, but With Hidden Dangers
As federal loan caps tighten and access to affordable funding shrinks, more students may turn to private lenders. However, experts caution against this trend, warning that:
- Private loans carry higher interest rates
- They lack income-driven repayment options
- Forgiveness programs, such as Public Service Loan Forgiveness (PSLF), do not apply
Without the safety nets of federal loans, students using private funding may find themselves in deeper financial trouble long after graduation.
Review, Plan, and Prepare
With the full transition deadline set for July 1, 2028, borrowers still have time to make informed decisions. Here are some essential steps:
- Use the Department of Education’s Loan Simulator to estimate future payments under RAP or the standard plan
- Contact loan servicers to understand how your current plan will be affected
- Avoid default by understanding repayment options, especially if you’re already struggling
- Reconsider borrowing strategies if you’re planning future education
- Monitor updates from the Department of Education as more guidance is released
FAQs: Understanding the One Big Beautiful Bill Act
Q1. What is the One Big Beautiful Bill Act?
A 2025 law signed by Donald Trump that overhauls federal student loan repayment plans, introduces borrowing caps, and restores collection powers.
Q2. What repayment plans are now available?
Two plans:
- Repayment Assistance Plan (RAP) with income-based payments and forgiveness after 30 years
- Standard Repayment Plan with fixed payments over 10–25 years
Q3. What happened to the SAVE, PAYE, and IBR plans?
These plans will be phased out by July 1, 2028. Borrowers must transition to RAP or Standard Repayment by then.
Q4. Will my payments increase under RAP?
For many, yes. SBPC estimates show that borrowers may pay hundreds more monthly, especially if they previously paid little or nothing.
Q5. Can I still apply for deferment or forbearance?
No. Deferment is eliminated, and forbearance is capped at two uses over the life of the loan.
