Student Loan Update: Change Could Lower Payments for Mill...

By Suzanne Blake

Reporter, Consumer & Social Trends

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Student loan borrowers could see their monthly payments lower after the U.S. Department of Education finalizes its updates to the repayment plans available.

While previously borrowers were required to prove their income was below a certain level or "partial financial hardship," to qualify for the Income-Based Repayment plan (IBR), new rules under President Donald Trump have gotten rid of this requirement.

“In the meantime, servicers will hold IBR applications that would otherwise be denied,” new guidance said.

Why It Matters

Several changes have been implemented under Trump's fiscal plan at the DOE.

Undergraduate loans have been capped, and the GRAD PLUS program has also been eliminated. The new Repayment Assistance Plan is also available, but only students pursuing a “professional” degree can borrow up to $50,000 per year.

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What To Know

The Department of Education confirmed that by December 2025, it would complete a key change to the Income-Based Repayment (IBR) program, one of its flagship plans for making student loan payments more manageable.

Previously, borrowers needed to prove they faced a "partial financial hardship" or earning below a certain threshold that made monthly payments difficult in order to qualify for IBR. This cap has now been removed following the adoption of President Trump’s recent fiscal legislation, referred to within the administration as the “Big, Beautiful Bill."

As a result, higher earners and almost all federal student loan borrowers are now eligible to enroll in IBR, expanding opportunities for payment relief.

"In the past, to qualify for the Income-Based Repayment Plan, borrowers had to submit proof of "partial financial hardship" in order to qualify for lower monthly payments," Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek. "These payment amounts were typically capped at 10 percent of a borrower's monthly discretionary income. However, starting later this month, that proof requirement will go away, and the result will be many additional borrowers potentially qualifying for the plan."

IBR links monthly payments to a percentage of the borrower's discretionary income: typically 10 percent, but up to 15 percent for those with older loans. Remaining balances are forgiven after 20 or 25 years, depending on when the loan was taken out.

While this change provides a reprieve for many, it comes as other repayment options are phased out. Trump’s fiscal package eliminated the Biden-era Saving on a Valuable Education (SAVE) plan and will phase out the Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans by July 2028. Estimates suggest around 2.5 million borrowers are currently enrolled in ICR or PAYE plans.

Another option coming in July 2026 is the Repayment Assistance Plan (RAP), which offers the lowest possible monthly bill for some borrowers in exchange for a longer forgiveness timeline of 30 years instead of the typical 20 or 25. While this extends the life of the loan, it increases access to manageable payments for borrowers needing long-term flexibility.

The Trump administration has also capped federal student loan amounts for undergraduate studies and eliminated the GRAD PLUS program. Only professional degree-seekers may borrow up to $50,000 per year. While these measures aim to control rising college costs, they could constrain access to certain advanced degrees for some students.

What People Are Saying

Linda McMahon, Secretary of Education, said in a Breitbart interview: “When you think about the fact that a university could just simply say, this is how much it costs to come and get this program, and then a student could borrow that amount, what incentive is there for colleges and universities then to reduce their cost? What is the opposite incentive? It is to raise their costs…And so we have had to stop that and put some caps on that.”

Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: "I’ve often said this administration would eventually force repayment, and it looks like that time has come. Phasing out the PAYE and ICR plans in favor of the new RAP plan lets borrowers keep their forgiveness schedules while lowering monthly payments for some. Those under ICR could see smaller payments under IBR, and thankfully, there are now plenty of online tools to estimate your new amount."

Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: "Without the hardship proof requirement, even high income earners could technically enroll in the plan, but do so with caution. These plans were meant to assist those who financially needed the lower monthly payments. If you can afford to pay more, it's smarter in the long term to pay that debt off as quickly as possible."

What Happens Next

Thomson said in the long run, loan forgiveness will likely take longer under the new rules.

"Many borrowers will be nudged into RAP, which extends forgiveness timelines to 30 years," Thompson said. "But here’s what’s not being talked about: the administration’s ability to exclude public sector employees of organizations it deems to have an 'illegal purpose.' That’s code for DEI programs."

Updated Department of Education rules also scrutinized which nonprofit or public service employers are eligible for the Public Service Loan Forgiveness program. Some organizations, or those deemed to have a "substantial illegal purpose," such as working with undocumented immigrants or transgender youth, may no longer qualify. While forgiveness for income-driven repayments will continue, changes in eligibility could impact borrowers hoping for relief via public service careers.

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