(The Lion) — Americans still paying off federal student loans can enroll in new repayment plans beginning Wednesday under the Trump administration’s reforms in the One Big Beautiful Bill Act.
The law creates two repayment options: the Repayment Assistance Plan and the Tiered Standard Repayment Plan. Borrowers have 90 days after the plans launch July 1 to switch from the Biden administration’s Saving on a Valuable Education (SAVE) plan to one of the new options.
Borrowers who do not switch will automatically be enrolled in the Standard Repayment Plan, which has a 10-year repayment term and calculates monthly payments based on the loan balance rather than income.
According to the Congressional Budget Office, the new repayment plans will save taxpayers more than $342 billion over 10 years compared with the Biden administration’s SAVE plan.
The Repayment Assistance Plan bases monthly payments on income, with borrowers paying between 1% and 10% of their income each month, according to the Department of Education. Any remaining balance will be forgiven after 30 years of qualifying payments.
To encourage on-time payments, the plan waives any remaining monthly interest for borrowers who pay on time. It also includes a principal reduction benefit of up to $50 per month. If an on-time payment does not reduce the loan principal by at least $50, the Department of Education will provide a matching principal payment of up to $50.
The Tiered Standard Repayment Plan offers fixed repayment terms of 10, 15, 20 or 25 years based on the amount borrowed. The longer repayment periods lower monthly payments for borrowers with larger loan balances. Unlike the SAVE plan, which allowed some borrowers to make $0 monthly payments, the new plan requires borrowers to make payments toward their debt.
The changes come as the future of the Department of Education remains uncertain, with Trump continuing to call for its eventual closure. Under the new law, the Treasury Department and the Department of Education will jointly oversee the repayment system. The Department of Education will continue to oversee policy, while the Treasury Department will administer loan disbursement and repayment.
