The Financial Compass

Federal Student Loan Changes Under OBBBA: Existing Borrower Deadlines & Decisions

At Stillwater Private Wealth, we help clients problem solve for anything that impacts their financial lives. Few changes are as consequential to personal finances right now as the sweeping changes to federal student loans.

If you are a federal student loan borrower on an income driven repayment (IDR) plan, like SAVE, the email you will receive from the US Department of Education on July 1st SHOULD NOT be overlooked. You have 90 days to act, or the government will act for you.

Significant changes go into effect that impact your student loans in response to the One Big Beautiful Bill Act (OBBBA). The overhaul restructures repayment options, borrowing limits, and loan types.

The focus of this post will be on existing federal student loan borrowers, not new borrowers. Because your loans were taken out before July 1, 2026, you are in a uniquely grandfathered position. You have more flexibility than new borrowers, but there are still sunsets on the horizon that you need to be aware of.

Protection of Existing Options

Unlike new borrowers, you can still choose from the following:

1) Standard Repayment Plan—Fixed 10-year term & payments
2) Graduated or Extended Plans—Lower initial payments or terms up to 25 years
3) Income-Based Repayment (IBR)—Payments tied to income & the only legacy IDR plan that survives permanently under the OBBBA

You can still join the income-based repayment (IBR) plan until July 1, 2028, as long as you have no new loans post-July 1, 2026. Same goes for PAYE and ICR, but they are subject to the sunset in 2028. Switching to PAYE or ICR now would mean switching again within the next two years.

As you will notice, the SAVE plan is the one income-driven repayment (IDR) plan not on the list. The US Department of Education stopped accepting applications for new enrollments due to ongoing legal challenges and placed existing borrowers in forbearance.

For those in the SAVE plan you will have 90 days from July 1, 2026, to choose a new plan, or the federal government will either choose the Standard Repayment Plan or the Tiered Standard Plan for you. The kicker? Neither qualifies for Public Service Loan Forgiveness (PSLF) for various reasons. DO NOT let the government make that choice for you.

July 1, 2028 Sunset—PAYE, ICR & IBR

If you are currently enrolled in Pay As You Earn (PAYE) or Income-Contingent Repayment (ICR) plans, your plans will sunset on July 1, 2028. Borrowers must transition to different repayment plans, like Standard, RAP or IBR, before that date.

While PAYE and ICR borrowers are not required to make changes now, it is worth evaluating your options today. The sunset will be here before you know it.

New Options Available

For existing SAVE, PAYE, or ICR borrowers, your new options are:

1) Tiered Standard Plan
2) Repayment Assistance Plan (RAP)
3) *Income-Based Repayment (IBR) – assuming no new loans post-July 1, 2026 & elected before July 1, 2028

Tiered Standard Plan

The Tiered Standard Plan is an amortized, fixed-payment plan that ranges from 10, 15, 20 or 25 years determined by the balance of your outstanding debt. For IDR borrowers, it could lead to a significant increase in your monthly payment. IT IS NOT income driven.

Repayment Assistance Plan

If you are looking for an income driven option, the new Repayment Assistance Plan (RAP) is the option that will eventually replace all previous IDR loans— except IBR plans. Repayments range from 1-10% of your adjusted gross income (AGI). For those with dependents, your monthly payment drops $50/per dependent.

It is worth mentioning that once you choose RAP, you cannot switch back to a standard plan. Consider it an irrevocable decision.

The good news is, if your RAP payment does not cover your monthly interest, the government will waive the remaining interest so your loan balance will not grow further. It is also eligible for PSLF, unlike the Tiered Standard Plan. For those who do not qualify for PSLF, any remaining balance is forgiven after 360 monthly payments (or 30 years).

IBR maintains its 20- or 25-year forgiveness depending on when you borrowed the loans. Again, this is for individuals who do not qualify for PSLF.

Critical Tax Warning & Considerations

Be mindful, that any forgiven RAP or IBR balance, not for PSLF purposes, at that point is taxable at the federal level as ordinary income, and could also be taxable at the state level as well. This is a potential tax bomb if not planned for properly.

This is different than Public Service Loan Forgiveness (PSLF). PSLF is tax-free at forgiveness at the federal level. It is worth confirming your state’s stance on PSLF taxation if it applies to you.

Why Action May Be Needed

You’re busy. This is a big decision with a meaningful impact on your financial life and goals. Are you confident you are making the best decision possible for your unique situation? That’s why financial planners exist.

If you’re married and considering IDR plans, you should also be considering whether to file married filing jointly (MFJ) or married filing separately (MFS). If you qualify for PSLF, you cannot afford to let the federal government pick a plan for you.

The burden can seem insurmountable. If that feeling is familiar, please speak to a financial professional who can help you navigate this decision. We are here to help.

DISCLAIMER

The information provided does not constitute legal, tax, or financial advice. Before making any investment or financial decisions, you should consult with a qualified attorney, tax advisor, or financial professional who can consider your individual circumstances.

SOURCES

+ U.S. Department of Education. (2026, March 27). Next steps for borrowers enrolled in the unlawful SAVE plan. ed.gov
+ Student Loan Borrower Assistance (National Consumer Law Center). (2026, April 28). The SAVE plan is ending: What borrowers in SAVE need to know. studentloanborrowerassistance.org
+ Best Colleges. (2026). SAVE plan ending: What borrowers need to do next. bestcolleges.com
+ CNBC. (2026, May 31). Student loan ‘big beautiful bill’ changes take effect July 1. cnbc.com
+ Tate Esq. (2026). Big Beautiful Bill student loan changes: What the law does. tateesq.com