US student loan repayment just changed dramatically: Here’s what you need to know and why IBR could be your best option

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 Here’s what you need to know and why IBR could be your best option

What US education loan borrowers need to know about student loan repayment changes and IBR benefitsx. (AI Image)

Student loan repayment plans in the US have undergone significant changes, affecting millions of borrowers. Recent legal challenges, legislative actions, and policy updates have altered the landscape of federal student loan repayment options, with further modifications expected in the coming months.The US Department of Education has quietly implemented revisions to existing repayment plans, including the removal of certain loan forgiveness benefits and the extension of repayment timelines. Borrowers are urged to understand these developments to navigate their repayment strategies effectively.Major changes to SAVE and the end of loan forgiveness under some plansOne of the most notable changes involves the cancellation of the Saving on a Valuable Education (SAVE) plan.

Introduced in 2023 by the Biden administration, SAVE promised to reduce monthly payments by up to half for nearly 7.7 million enrollees, using an income-driven repayment (IDR) model. However, legal challenges led by Republican officials and court rulings have stalled and effectively ended the programme.As reported by the CNBC, “Staying in a forbearance is not wise, as the interest will continue to accrue, digging the borrower into a deeper hole,” said higher education expert Mark Kantrowitz, referring to the current payment pause borrowers face while the SAVE legal battles continue.

Additionally, the US Department of Education has removed student loan forgiveness from several repayment plans, including the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans. These plans are also scheduled to be phased out by July 1, 2028, according to updated federal legislation.What you need to know about IBR and other repayment optionsWith the SAVE plan effectively defunct, the Income-Based Repayment (IBR) plan is now the preferred option for many borrowers seeking affordable monthly payments.

IBR caps payments at 10% of discretionary income for most borrowers, rising to 15% for those with older loans, and offers loan forgiveness after 20 or 25 years, depending on the age of the loan.The US Department of Education has temporarily paused the loan discharge component of IBR while reviewing court rulings connected to SAVE. This pause affects how eligible payment periods count toward forgiveness. However, the requirement to prove “partial financial hardship” for IBR eligibility has been waived, although some borrowers still face income-related rejections, according to Elaine Rubin, director of corporate communications at Edvisors, as reported by the CNBC.New repayment assistance plan launching in 2026Starting July 1, 2026, a new option called the Repayment Assistance Plan (RAP) will become available. Unlike previous IDR plans, RAP calculates payments based on adjusted gross income (AGI) rather than discretionary income, with monthly payments ranging from 1% to 10% of earnings. A minimum monthly payment of $10 will apply to all borrowers, differing from some IDR plans where low-income borrowers could pay nothing.RAP extends loan forgiveness to 30 years, longer than the typical 20 or 25 years under current IDR plans. Borrowers taking out loans after July 1, 2026, will have only two repayment options: RAP and a revised Standard Repayment Plan.Changes to the standard repayment plan and timeline extensionsThe Standard Repayment Plan, typically a fixed 10-year term, will change for new borrowers from July 1, 2026. Loan balances will determine repayment duration: up to $24,999 will remain a 10-year term; $25,000 to $49,999 will extend to 15 years; $50,000 to $99,999 will stretch to 20 years; and debts over $100,000 will have a 25-year term.This adjustment means many borrowers will face longer repayment periods than before.What borrowers should keep in mind moving forwardCurrently, some borrowers remain in forbearance while SAVE-related litigation continues, but interest accrues during this pause. The US Department of Education advises caution, as this can increase total debt over time.With the phase-out of forgiveness benefits in several plans, the IBR plan remains the most viable income-driven repayment option available today. As the CNBC reports, “While the partial financial hardship requirement for IBR was removed, borrowers are still being rejected due to their income,” said Elaine Rubin. Borrowers should monitor updates closely as the department adjusts eligibility and payment calculations in response to ongoing legal and legislative developments.TOI Education is on WhatsApp now. Follow us here.

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