Student Loans in 2025: Major Repayment Changes Coming: Here's What You Should Know

If you have federal student loans, August 2025 could mark a turning point. Big changes are coming to repayment plans, and if you don’t act, your balance could grow faster than you expect.

The recently passed One Big Beautiful Bill (OBBB) and a federal court decision are reshaping the future of student loan repayment. Some repayment plans will soon disappear, while others could become more expensive — and less forgiving.

Interest Shield Ended August 1, 2025

One major change: the interest shield in the SAVE plan ends on August 1, 2025.

Until now, SAVE kept interest at $0 for those whose payments didn’t fully cover their loans.

After August, interest will start accruing again, even if your monthly payment remains the same.

• What this means: You could rack up around $3,500 in interest annually if you stay on SAVE.

• Monthly payments may still be paused, but your loan will grow behind the scenes.

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Repayment Plans Being Eliminated by 2028

Under the OBBB law, three popular income-driven repayment (IDR) plans will be phased out:

• SAVE (Saving on a Valuable Education)

• PAYE (Pay As You Earn)

• ICR (Income-Contingent Repayment)

The Department of Education will remove these options by July 1, 2028. In their place, borrowers will have access to:

1. Income-Driven Repayment Plans

2. RAP (Repayment Assistance Plan) – launching July 2026

What is the New RAP Program?

• Payments will range from 1% to 10% of your discretionary income

• Minimum payment is $10/month

• Forgiveness after 30 years

• No interest cap — unlike SAVE, your balance could grow

If you take no action by 2028, you’ll be automatically moved into RAP, which could make it harder to qualify for Public Service Loan Forgiveness (PSLF).

What Should You Do?

You now have three main options:

1. Stay on SAVE: Risk growing interest starting August 2025

2. Switch to IBR: Preserve PSLF eligibility, but with possibly higher monthly payments

3. Wait for RAP: May offer flexibility, but fewer protections and higher long-term costs

After July 1, 2026, all new federal loans will only be eligible for RAP or standard repayment.

Smart Next Steps

• Use the Loan Simulator Tool at studentaid.gov to preview your best repayment path

• If you’re pursuing PSLF, switching to IBR sooner could help you stay on track

• Watch for updates during federal loan recertification or open enrollment periods

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