...
By Suzanne Blake
Reporter
0
Share
Newsweek is a Trust Project member
See more of our trusted coverage when you search.Prefer Newsweek on Googleto see more of our trusted coverage when you search.
Millions of student loan borrowers in the United States are expected to see their monthly payments rise significantly following President Donald Trump's signing of the One Big Beautiful Bill Act.
The law, enacted on Friday, replaces income-driven repayment options from former President Joe Biden's administration with new plans projected to cost borrowers hundreds of dollars more each month.
Economic analyses warn that the sweeping changes will impact college students, families and existing borrowers across the country.
Read More on News
The typical borrower will see monthly student loan costs spike hundreds of dollars per month, or thousands of dollars per year, according to a memo sent to lawmakers by the Student Borrower Protection Center.
...
Why It Matters
The passage of the One Big Beautiful Bill marks a major shift in federal loan policy. For years, the SAVE plan and a variety of income-driven repayment (IDR) options let borrowers manage payments based on income and qualify for expedited debt forgiveness. The new law eliminates those protections, replacing them with choices viewed as less equitable by many.
With higher monthly payments going into effect, borrowers—especially those already facing financial strain—could see budget pressures worsen. The legislation arrives against a backdrop of rising delinquency rates. Nearly one in three Americans with federal student debt, or 5.8 million people, were reported delinquent on payments in 2025.
What To Know
The One Big Beautiful Bill Act wipes out federal income-driven repayment plans, such as the SAVE plan introduced under Biden and installs two new choices for borrowers: the Repayment Assistance Plan (RAP) and an updated Standard Repayment Plan.
- Repayment Assistance Plan (RAP): Under RAP, monthly payments are determined by income, from 1 percent to 10 percent, with a $10 minimum. However, RAP offers less aggressive debt relief than the prior SAVE plan, with loan forgiveness only after 30 years and stricter rules on deferment.
- Standard Repayment Plan: This plan requires fixed payments for terms ranging from 10 to 25 years, depending on the original amount borrowed, and lacks the income-based adjustments that previously benefited lower-earning borrowers.
The Student Borrower Protection Center calculated the new loan framework would raise annual loan payments by:
- $2,929 for typical degree-holding borrowers
- $1,761 for those with some college but no degree
- $2,808 for a family of four headed by a bachelor's degree holder
Loan payments could "spike by hundreds of dollars per month, or thousands of dollars per year," the center reported to Senators Bill Cassidy, a Louisiana Republican, and Bernie Sanders, a Vermont independent.
The new framework extends the mandatory payment period for loan forgiveness under RAP to 30 years and eliminates the option to pause payments because of economic hardship or unemployment.
Borrowers will also see their ability to use short-term forbearance (a pause in payments) reduced, increasing the risk of default for those facing financial challenges.
The Act caps total borrowing for graduate students at $100,000, for law/medical students at $200,000, and for parents at $65,000 per student. The Graduate PLUS loan program is also phased out for new participants, and fewer students now qualify for federal Pell Grants due to tighter eligibility rules.
"I don't know about you, but when I heard that medical school can cost over $300,000 at private universities, that $200,000 cap started looking pretty...inadequate? Like trying to buy a house with a mortgage that only covers half the price," Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek.
That's likely to cause increased strain on borrowers: Up to 1.8 million could default by July 2025, with millions more expected to follow by the fall. Loan rehabilitation opportunities have been expanded under the Act, but experts warn that more Americans will face aggressive collection tactics as defaults rise.
With stricter federal limits, some students may consider private loans. However, analysts strongly cautioned against this, noting that private student loans generally come with higher interest rates, fewer repayment options and less borrower protection than federal loans.
"Without federal loans, students will have to turn to private lenders. And trust me, that's not the same thing at all. Private loans don't qualify for those public service forgiveness programs," Ryan said.
"The ones that help doctors who choose to work in underserved communities actually pay off their debt. Plus, private loans are way less flexible. No income-driven repayment plans, fewer options if you hit a rough patch financially."
What People Are Saying
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: "The whole thing feels like it's creating this weird two-tier system where only kids from wealthy families can afford to become doctors, lawyers or dentists. Which is ironic, right? Because the bill is supposedly trying to address how unlimited borrowing has driven up education costs. But their solution is essentially...let the private market handle it?"
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "The issue for many borrowers who qualified for SAVE or other payment assistance programs is the lack of these options will equate to their monthly payments rising. Technically the borrower is not paying more over the duration of the loan; the same borrowed amount stands. However, monthly payments will rise for most due to a lack of assistance plans."
What Happens Next
Full implementation of the One Big Beautiful Bill will occur over a multiyear period.
Borrowers currently enrolled in the SAVE plan may have at least one year—between July 2026 and July 2028—to choose a new repayment arrangement.
"The long-term damage here is clear: a growing wealth divide that pushes more people to the margins. Many will fall into default—not because they don't want to pay, but because they simply can't," Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek.
"And when that happens, it's more than just a financial mark. These loans become a permanent lien on people's lives—blocking access to homeownership, delaying family formation and cutting people off from participating fully in society."
View 0 Comments
Submit Correction
View Editorial & AI Guidelines