Aug 8, 2025
Few things take the shine off a hard-earned degree like a mountain of student debt. And millions of Americans are feeling the weight: The Education Data Initiative says more than 42 million borrowers owe a staggering $1.77 trillion dollars in student loan debt, with the average individual balance topping $38,000.
Many of those borrowers may soon see their monthly payments go up, thanks to a section of President Trump's “One Big, Beautiful Bill” that includes changes to current student loan repayment plans.
Advertisement
Here’s what you need to know about the President’s new repayment process.
Thanks for subscribing!
Read the best of Moneywise in 5 minutes or less.
By signing up, you accept Moneywise Terms of Use, Subscription Agreement, and Privacy Policy.
What are my new options?
After July 1, 2026, new borrowers will have two choices: A standard fixed repayment plan or the Repayment Assistance Plan (RAP).
RAP is an income-based student loan repayment plan that the Trump administration says will simplify the loan repayment process, as it will replace all preexisting income-based plans for new borrowers, such as SAVE, PAYE, REPAYE and ICR.
RAP, however, is a little less forgiving than the current income-based repayment plan. Your monthly payments will now be estimated based on your adjusted gross income (AGI), which is your total earnings before taxes after certain deductions. Additionally, RAP will no longer cap your payments at a portion of your discretionary income, and monthly payments can range from 1% to 10% of your AGI.
Plus, if you were expecting loan forgiveness after 20 or 25 years with the usual IBR plan or after 10 years with Public Service Loan Forgiveness, you need to know that RAP will have a 30-year timeline.
And you may not be able to use RAP to fund your entire education, either. In the administration’s efforts to combat the rising costs of college, Trump has lowered lifetime borrowing limits, hoping that if students can’t take on the whole cost with loans, schools will lower tuition prices. Under RAP, Parent PLUS loans have a limit of $65,000 per child, and graduate students have a lowered limit of $100,000.
Note that while all new borrowers are required to enroll in either RAP or the standard fixed plan after July 1, 2026, current borrowers can remain on the present income-based repayment plan.
Must Read
- The ultra-rich use these 5 real estate strategies to build wealth while they sleep — you can start with just $100
- Here’s the average income of Americans by age in 2026. Are you keeping up or falling behind?
- Insurance companies profit most from drivers who auto-renew without shopping around. Comparing 100+ quotes takes 2 minutes and costs nothing
Join 250,000+ readers and get Moneywise’s best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
Which plan is best for me?
If you are a new borrower and aren’t planning to borrow until after July 1, 2026, you’ll have to choose between RAP or the standard fixed plan. How will you decide which one to go with?
Advertisement
Consider what you can afford month-to-month. RAP offers lower payments initially, but it will start to climb when your income does. With the standard plan, you can expect the same fixed amount every month until the loan is paid off.
While payments with RAP may be lower, your total loan balance can take much longer to be paid off or forgiven versus the standard plan, which has a fixed rate up to 10 years. That could also mean a little less interest overall, assuming you’re making timely payments.
If you are already enrolled in an income-based payment plan, start preparing for incoming deadlines. Current income-driven plans such as SAVE, REPAYE, PAYE and ICR will all be phased out by July 2028, so consider switching to IBR before then if you don’t want to be on RAP or the standard plan.
How can I prepare?
Tackling student loans is a daunting task, and the idea of mounting debt makes the idea of a college education stressful for students and their parents. Mentally preparing and budgeting for student loan debt may help you prepare to take on payments after you graduate.
Make sure to track what you need to borrow each semester, and keep an eye on your loans using the National Student Loan Data System, a national database about loan and grant information. While the job market can be volatile and unexpected, try to borrow no more than what you expect your first year’s salary to be after you graduate.
While you are in school, consider making a “practice budget” based on your estimated monthly payments, which you can figure out using a loan simulator. And even better, start making small payments right after you take out the loan instead of waiting for graduation: Small payments early on can save a lot in interest later on.
You May Also Like
- JP Morgan sees gold hitting $6,000/oz before 2027 — and a Gold IRA lets you hold the physical metal while deferring the tax bill. Get your free guide from Priority Gold
- Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake — here’s what it is and the simple steps to fix it ASAP
- Thanks to Jeff Bezos, you can now become a landlord for as little as $100 — and no, you don't have to deal with tenants or fix freezers. Here's how
- Millionaires under 43 are reshaping investing — just 25% of their portfolios are in stocks. Here’s where their money is going
Chris Clark is a Kansas City–based freelance journalist covering personal finance, housing and retirement. A former Associated Press editor and reporter, he writes plainspoken stories that help readers make smarter financial decisions.
