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Education

Trump’s New Student Loan Repayment Plans Are Live. Here's a Crash Course for Borrowers

Money; illustration AI-generated using Claude

President Donald Trump’s student loan reforms are now in effect, leaving federal borrowers to wade through a reshaped set of repayment options.

The One Big Beautiful Bill Act created two new repayment plans, which launched July 1. At the same time, the Education Department has begun sending out notices to millions of borrowers on the defunct Saving on a Valuable Education (SAVE) plan, giving them 90 days to switch into a different plan. For most, that will almost certainly result in higher monthly payments.

Amid the tidal wave of rule changes, experts tell Money that borrowers — especially ones in SAVE — need to strategize now to ensure they’re getting enrolled in the best repayment plan for their long-term goals, whether that’s securing the lowest monthly payment possible or taking advantage of loan forgiveness.

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“The biggest mistake I'm seeing is borrowers who just aren't doing anything with their student loans,” says Glenn Sanger-Hodgson, an advisor at Student Loan Planner.

“This is primarily those on the SAVE plan who are just waiting to be forced off but also includes borrowers who picked a different repayment plan years ago and have just been on auto pilot," he adds.

The clock is ticking for borrowers in SAVE

After years of legal battles, the SAVE plan was officially struck down in court in March. For months, Trump's Education Department has been encouraging borrowers in SAVE to switch to another plan and begin repayment. But many borrowers have decided to hold out as long as they can.

That's because they haven't been required to make a payment since July 2024, when borrowers were put in forbearance while the court cases played out.

Last summer, interest began accruing on SAVE loans again — but payments stayed frozen. Despite that nudge, many borrowers hunkered down. According to federal data, about 7 million borrowers remain on the plan as of the end of June.

Now the Education Department has started sending out 90-day notices to borrowers in SAVE with an ultimatum: Switch from SAVE or we’ll switch for you.

“Based on the Department of Ed's guidance, if you ignore it, they're going to put you on the standard plan,” says Betsy Mayotte, president of The Institute of Student Loan Advisors (TISLA). “And that will be — for many people — very expensive.”

On top of that, you are losing out on potential progress toward loan forgiveness by not making payments in a plan that offers it, according to Adam Minsky, an attorney specializing in student loans. (Even if you made voluntary payments during the SAVE forbearance period, they are not logged in your payment history toward forgiveness.)

Not everyone in SAVE has received the 90-day notice yet, either, Minsky says. The department is sending them out in waves, and you may not receive the alert until the end of the year.

To ensure you get the notice on time, make sure to keep your contact information up-to-date with your loan servicer and on StudentAid.gov.

Where People Are Refinancing Their Student Loans Today

In most cases, experts say, there’s no reason to wait on the letter. Interest is already accruing.

“Whether you've gotten the notice or not,” Mayotte says, “you should be exploring what plans you're eligible for and seeing which one best fits your current budget as well as your long-term student loan repayment strategy.”

She notes that the only scenarios in which it makes sense to wait are when borrowers cannot afford monthly payments or need to prioritize higher-interest debt before restarting payments.

Holding the line for a potential legal reversal, as some wishful borrowers on social media are hoping for, is not a sound strategy, experts warn.

“SAVE is just not coming back,” she says, adding a bitter truth that borrowers should prepare for: “For most people, they’re not going to be able to get a plan that’s remotely close to what their SAVE payment was.”

All that said, Sanger-Hodgson says not to panic. There’s still plenty of time to figure out the best course of action.

How to find the right repayment plan

If you have federal loans taken out before July 1, you have several repayment options available that new borrowers do not have access to. Two of these options are income-driven repayment (IDR) plans that are sunsetting in 2028, but they are still accepting applications as long as all of your loans were disbursed before July. Additionally, you can join the newly created Repayment Assistance Plan, an income-driven plan created by the Trump administration.

Here’s a rundown.

‘Fixed payment’ plans

Fixed payment plans are repayment schedules aimed at getting you to pay off your loans over a defined term, usually 10 to 25 years. Older loans retain their eligibility for “standard,” “extended” and “graduated” plans.

Standard repayment plan: Payments are a fixed amount based on a 10-year payoff schedule.

Extended repayment plan: For larger debt loads ($30,000 or more), payments are a fixed amount based on a 25-year payoff schedule. (Consolidated loans may go up to 30 years.)

Graduated repayment plan: Payments start out lower and increase usually every two years based on either a 10- or 25-year payoff schedule. (Consolidated loans may go up to 30 years.)

Mayotte notes that these plans offer no forgiveness, and payments made on them do not always count toward payment history if you were to switch to a plan that does have a forgiveness component. Still, they could result in lower monthly payments compared to income-driven plans depending on your salary and loan balance.

New loans (defined as those taken out after July 1, 2026) do not have access to these options. The new tiered payment plan is the default option, which sets fixed payments to a 10- to 25-year payoff schedule based on the amount borrowed.

Income-driven repayment plans

As the name implies, income-driven repayment plans base your monthly payments on your income, usually between 10% and 20% of your so-called discretionary income. Discretionary income is the money that's left over after accounting for basic expenses (in effect, subtracting a portion of your state's federal poverty line from your annual pay).

These plans also offer loan forgiveness of the remaining debt after you’ve made on-time payments for a period of time.

Income-Based Repayment (IBR): For loans taken out between July 2014 and July 2026, payments are based on 10% of discretionary income. Any remaining balance after 20 years of on-time payments is forgiven. For loans taken out before July 2014, payments are based on 15% of discretionary income, and balances are forgiven after 25 years of payments. Payments are capped, so they will not exceed the amount you’d pay under the 10-year standard repayment plan. This plan will not be sunsetting in 2028.

Income-Contingent Repayment (ICR): Monthly payments are based on 20% of discretionary income, and remaining balances are forgiven after 25 years of payments. This plan will be sunsetting in July 2028.

PAYE: Monthly payments are based on 10% of discretionary income, and remaining balances are forgiven after 20 years of payments. Payments are capped and will not exceed the amount you’d pay under the 10-year standard repayment plan. This plan will be sunsetting in July 2028 as well.

Repayment Assistance Plan (RAP): RAP bases payments on total adjusted gross income rather than income above a protected threshold. The rate rises from 1% to 10% as income increases, with a minimum $10 payment and a $50 monthly reduction for each eligible dependent. After 30 years of on-time payments, the remaining balance is forgiven. If the monthly payment amount does not cover the interest of the loan, the remaining interest is waived so that the balance does not grow over time. Both new and old student borrowers can sign up. Parent borrowers are not eligible for RAP.

Each plan has its unique pros and cons, and experts recommend using a student-loan repayment calculator to find the best option for your situation. The Education Department has its own calculator. Student loan advice groups like TISLA and Student Loan Planner offer their own free calculators as well.

Factor in Public Service Loan Forgiveness

Another consideration for the repayment plan is whether your goal is to qualify for Public Service Loan Forgiveness (PSLF).

PSLF extends forgiveness to borrowers who work for the government or a qualifying non-profit organization for at least 10 years and make 120 on-time payments in a qualifying repayment plan. All income-driven repayment plans (including RAP, IBR, ICR and PAYE) are considered qualifying plans, and so is the standard 10-year repayment plan. However, the other fixed-payment plans do not count toward PSLF.

But forgiveness shouldn’t be the only consideration.

“I want to remind people that we all get caught up with the word forgiveness,” Mayotte says. “But the name of the game isn't forgiveness — it’s paying the least amount out of your own pocket over time.”