Sweeping Student Loan Reforms Advance Through Regulatory Process
The Department of Education has clarified crucial details about massive changes coming to federal student loan repayment as it advanced new regulations this month, potentially affecting over 40 million borrowers. These proposed regulations represent the next step in implementing the “One Big, Beautiful Bill Act” that President Donald Trump signed into law last summer, following a party-line Congressional Republican vote. The legislation directs the Department to establish regulations facilitating major changes to federal student loan programs, continuing the federal student loan repayment overhaul that has been developing throughout 2025.
The department convened the Reimagining and Improving Student Education (RISE) committee to review proposed regulations, with the group meeting earlier in October to discuss provisions that will fundamentally alter student loan repayment. These changes come amid broader financial service disruptions and recoveries affecting American consumers, though the student loan modifications represent a more permanent structural shift in how borrowers will manage their educational debt.
Fixed Repayment Plans Face Major Restructuring
The legislation brings significant changes to fixed federal student loan repayment plans, which are not tied to borrower income. Current options include the 10-year Standard plan, 25-year Extended plan, consolidation Standard plan of up to 30 years, and Graduated repayment plans where payments start lower and increase over time.
Under the new law, these repayment plans will be eliminated for borrowers who take out new federal student loans or consolidate existing loans on or after July 1, 2026. After that date, the only fixed repayment option will be a new tiered Standard repayment plan with terms ranging from 10 to 25 years, depending on loan balance size. This restructuring mirrors technological advancements in automation and efficiency seen across other sectors, though applied here to the student loan system.
The Department confirmed during the RISE committee meeting that borrowers with existing federal student loans who don’t take out new loans or consolidate after the cutoff date will maintain access to “legacy” fixed repayment options, regardless of when they enter repayment.
“Based on feedback from negotiators representing state officials, student loan servicers, and legal assistance organizations, ED clarified within the regulatory text that continued eligibility for standard, extended, and graduated is based on the date of loan disbursement, not the date at which a borrower enters repayment,” said The Institute for College Access and Success (TICAS) in a blog post summarizing the hearing.
Income-Driven Repayment Overhaul
The legislation also makes substantial changes to income-driven repayment (IDR) plans that will have profound and lasting effects. IDR plans allow borrowers to make payments based on income and family size, historically providing a path to forgiveness after 20-25 years and serving as a required component of Public Service Loan Forgiveness (PSLF).
Under the bill, three of four existing IDR plans (ICR, PAYE, and SAVE) will be sunsetted by July 1, 2028. The IBR plan will remain with modifications, while a new Repayment Assistance Plan (RAP) will be created in 2026. RAP features a 30-year repayment term before forgiveness eligibility—longer than any existing IDR plan—but includes a principal and interest subsidy that stops future balance growth. This approach reflects performance optimization trends seen in industrial and energy sectors.
There will be a two-year period where ICR, PAYE, SAVE, IBR, and RAP coexist, but by July 2028, only IBR and RAP will remain. Current borrowers maintain IBR eligibility unless they take out new loans or consolidate after July 1, 2026, in which case they would only be eligible for RAP.
Key Clarifications and Committee Progress
During the RISE committee meeting, the Department clarified several important elements not expressly clear in the statutory text. The department confirmed that borrowers selecting RAP won’t be locked into that plan if they remain eligible for IBR, allowing switching between IBR and RAP.
“ED clarified that borrowers eligible for IBR may move freely between IBR and RAP even following the sunsetting of other ICR plans on July 1, 2028,” TICAS reported.
For existing Parent PLUS borrowers to be grandfathered into IBR, they must consolidate before July 1, 2026, enroll in ICR before July 1, 2028, and make one payment under ICR before switching to IBR. These implementation challenges echo regulatory implementation hurdles faced by other major financial reforms.
Committee negotiators also sought clarification about whether payments under REPAYE and SAVE plans—currently challenged in court—will count toward RAP forgiveness. The Department confirmed qualifying payments will count but opposed referencing the specific plans in regulations due to potential court rulings.
“Following an alternate proposal from the legal assistance and public institution negotiators, ED removed all references to existing plans from their proposal to clarify that qualifying payments on any income-driven plan prior to their sunsetting in 2028 will count toward forgiveness under RAP regardless of the court’s decision,” TICAS explained.
Transition Requirements and Automatic Placement
The statutory text wasn’t entirely clear about borrowers enrolled in plans sunsetting by 2028. The Department’s proposed regulations indicate these borrowers must affirmatively switch to IBR or RAP—the only IDR options available after July 1, 2028—or be placed in the tiered Standard repayment plan.
“The proposal requires borrowers with Direct Loans disbursed before July 1, 2026, who are in repayment plans that will be phased out to transition to an eligible plan (IBR, RAP, or the standard plan) by July 1, 2028, or be automatically moved into the standard plan,” TICAS summarized. Additionally, “Borrowers with loans disbursed on or after July 1, 2026, who do not select a plan will automatically be placed in the new tiered standard plan.”
This automatic placement mechanism shares similarities with strategic default positioning used in other financial contexts, though applied here to ensure borrowers don’t remain in discontinued plans.
Next Steps in Regulatory Process
The proposed regulations implementing student loan repayment changes under the “One Big, Beautiful Bill Act” are not yet finalized. The conclusion of the first RISE committee hearing and text tweaks represent the initial major step in advancing new rules.
“The Department allowed negotiators to submit proposed amendments until October 10, 2025, and will circulate revised regulatory text to negotiators, likely in the week before the next session,” TICAS explained. “The full committee will reconvene for its final work period on November 3-7, 2025, to further discuss these issues and vote on ED’s proposals.”
If RISE committee members reach consensus on proposed changes, the Department generally must accept the recommendations. Without consensus, the department has more flexibility in implementing its statutory interpretation. The ongoing regulatory development occurs alongside broader financial service stabilization efforts across the payment processing sector.
With millions of borrowers facing significant repayment plan changes, the coming months will be crucial for determining exactly how these sweeping reforms will be implemented and what they will mean for Americans carrying student debt.
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