Student Loan Updates After the Big Beautiful Bill: What Borrowers Need to Know
The student loan landscape has been reshaped dramatically in 2025. With $1.8 trillion in outstanding debt and millions of borrowers struggling, the passage of the One Big Beautiful Bill (OBBB) marks a turning point. Here’s what you need to know about the new repayment system, discharge options, and how bankruptcy may offer relief.
A Quick Look Back: From Pandemic Relief to Overhaul
2020–2023: Federal student loan payments and interest were paused under COVID protections. Borrowers enjoyed years of temporary relief, including zero-dollar payments under the SAVE Plan.
2024: Courts blocked parts of the SAVE program. Borrowers faced credit reporting again, and millions saw their credit scores plunge.
2025: The Department of Education resumed wage garnishments, tax refund offsets, and Social Security seizures. By May, only 38% of borrowers were current on their loans.
July 4, 2025: The OBBB passed, ushering in a complete overhaul of repayment plans.
What the One Big Beautiful Bill Changes
The OBBB simplifies and streamlines repayment:
All existing repayment plans will be eliminated by July 1, 2028.
Two repayment plans will remain:
New Standard Repayment Plan – Fixed payments with loan terms tied to balance:
10 years for balances under $25,000
15 years for $25,000–$50,000
20 years for $50,000–$100,000
25 years for $100,000+
Repayment Assistance Plan (RAP) – Income-driven, based on Adjusted Gross Income (AGI), not discretionary income.
Payments start as low as $10/month.
Cap at 10% of income for high earners.
Reductions for dependents.
Forgiveness after 30 years.
Waives unpaid monthly interest.
⚠️ Parent PLUS borrowers are excluded from RAP. They will only have access to the Standard Plan, unless they consolidate and enroll in an IDR before 2028.
Bankruptcy and Student Loans: New Opportunities
For decades, borrowers believed student loans were “impossible” to discharge. That’s no longer true.
Department of Justice Guidance (2022, updated May 2025):
Provides a streamlined process for proving “undue hardship” in bankruptcy.If you cannot afford to repay now, are unlikely to afford repayment in the future, and have acted in good faith, you may qualify.
Borrowers file an attestation form; DOJ and DOE review and may stipulate to discharge.
Results: 85% of cases in 2024 led to full or partial discharges.
Bankruptcy Courts & Student Loan Management Programs:
Some courts now offer structured programs that let debtors manage loans, enroll in repayment plans, and avoid administrative forbearance that often locks borrowers out of better options.
What Borrowers Should Do Now
Know your loan type. Federal loans come with protections; private loans may still qualify for discharge under “undue hardship.”
Check your repayment plan. Borrowers on SAVE, PSLF, ICR, or PAYE must transition to RAP or another plan by 2028. If you have a student loan that was taken out at this time, make sure to apply for ICR or PSLF before June 2026 or you will no longer be eligible for the program.
Consider bankruptcy if overwhelmed. New DOJ guidance makes relief possible where it once seemed hopeless.
Parent PLUS borrowers: Act quickly. Consolidate and enroll in an IDR before June 30, 2026, if eligible.
Final Thoughts
The One Big Beautiful Bill fundamentally reshapes how student loans are repaid and managed. While repayment options have narrowed, tools like the RAP plan and DOJ bankruptcy guidance provide real solutions. For borrowers, the message is clear: there are paths forward—whether through repayment, forgiveness, or bankruptcy.