Earning a college degree can significantly enhance your career, but it's not cheap — many students take on loans to pay for their education. According to the College Board, 50% of bachelor's degree recipients graduated with student loan debt.

If you need to finance your degree, it's essential to understand the two primary types of student loans: federal and private. Which type you use will affect your borrowing limits, repayment options, and overall loan cost.

Are federal or private loans better? In general, experts recommend exhausting federal loan options before turning to private loans. Although the Trump administration has made changes to federal financial aid, the recommendation to use federal loans first remains the same. However, for some borrowers, private student loans may be a more cost-effective option.

Federal student loans are offered by the U.S. Department of Education, and they make up the vast majority of outstanding education debt. In fact, federal loans account for more than 90% of the $1.77 trillion in national student loan debt.

Financial experts and organizations, such as the National Association of Financial Aid Administrators, the Consumer Financial Protection Bureau, and The Institute for College Access & Success, all stress the importance of exhausting all federal financial aid — including federal student loans — before turning to private loans. Why? They usually have lower interest rates than private loans, and the government provides more borrower protections and repayment options than private lenders.

For students and their parents, there are three different types of student loans available from the federal government:

Direct Subsidized: These loans are available only to undergraduate students who demonstrate significant financial need. The government waives the interest that accrues while the student is in school, during the loan’s grace period, and during any periods of deferment.

Direct Unsubsidized: Direct Unsubsidized loans can be used for undergraduate or graduate programs, though loans used for graduate school come with higher rates. The student is responsible for all interest that accrues.

Parent PLUS: Parents can borrow money to pay for their biological or adopted child's undergraduate education.

All federal loans have fixed interest rates, and all borrowers — regardless of their credit or income — qualify for the same rate on a given loan type.

Important: Grad PLUS Loans are a type of federal loan for professional and graduate students. However, the 2025 One Big Beautiful Bill (OBBB) eliminated this loan program. As of July 1, 2026, they will no longer be available.

Private student loans make up a small part — about 8% — of the overall student loan market. While the federal government issues federal loans, private student loans are provided by banks, credit unions, online lenders, and other financial institutions.

Although federal loans have fixed interest rates, private student loans can have either fixed or variable interest rates. Variable-rate loans typically have lower initial rates than fixed-rate loans, but the rates can change over time. Repayment terms on private education debt typically range from five to 15 years.

Students can use private student loans to pay for undergraduate or graduate programs. However, private loans are credit-based, meaning lenders have strict borrower requirements, and not everyone will qualify for a loan. Young college students typically don’t have the required credit to borrow yet, so parents or other loved ones often co-sign these loans.

Stuck with private student loans with high interest rates? Refinancing your private student loans could mean lower monthly payments and paying less interest overall.

When considering which type of student loans to use, consider these essential differences:

Annual and lifetime borrowing limits differ significantly between federal and private student loans, with private loans offering higher maximums.

There are established caps on Direct Subsidized and Direct Unsubsidized student loans. Depending on your dependency status and the year of college you're entering, the annual maximum ranges from $3,500 to $12,500 for undergraduate students and up to $20,500 for graduate students.

An aggregate or lifetime maximum also applies. It ranges from $31,000 to $57,500 for undergraduate students, and $138,500 for graduate students (that number includes all federal student loans you used for undergraduate study, too).

For Grad PLUS and Parent PLUS Loans, borrowers can borrow up to the total cost of attendance, as certified by the school.

However, the OBBB instituted new limits for loans issued on or after July 1, 2026. These limits will significantly impact graduate and professional students and parent borrowers. The table below highlights the new limits that will apply in the 2026-27 school year:

With private loans, lenders rarely have a fixed maximum. Instead, they allow students and parents to borrow up to the total cost of attendance for their program. Because their lending maximums aren't as restrictive as federal loans, private loans are a useful option for borrowers who have reached the federal borrowing limits and need additional cash to pay for school.

Federal loans are generally easier to qualify for than private loans. Federal student loans have no minimum income requirements, and Direct Subsidized and Direct Unsubsidized don't involve credit checks at all.

Applicants for federal PLUS Loans will undergo a credit check, but the credit requirements are less intensive. Rather than looking for a specific FICO score or better, the government reviews your credit report to see if you have an “adverse” credit history, meaning recent major credit issues like foreclosure, vehicle repossession, or collections.

Requirements for private loans are stricter. Borrowers typically need to have established credit histories and a FICO score of 670 or higher, as well as meet minimum income requirements. If an applicant doesn't meet the lender's requirements, the only way to qualify for a private loan is to add a co-signer to their application.

Federal loans always have fixed interest rates, and the rates for undergraduate loans tend to be low. They also have disbursement fees deducted from the loan when it is issued to you. These are the rates and fees for federal loans issued between July 1, 2025, and June 30, 2026:

Private loans can have fixed or variable interest rates, and they rarely have origination or disbursement fees. Rates vary by lender and whether the loan is used for undergraduate or graduate programs. We researched 20 leading private student loan lenders for undergraduate loans. As of August 2025, rates for variable-rate loans ranged from 4.19% to 18%, while fixed-rate loans ranged from 2.89% to 18%. Out of the 20 lenders we evaluated, none charged disbursement fees.

Important: Grad and Parent PLUS Loans have significantly higher rates than other federal loans. Borrowers with excellent credit may qualify for private student loans with lower rates, but keep in mind that private loans lack some of the benefits and protections of federal loans.

Federal student loans tend to be more generous in terms of in-school repayment than private lenders. Federal borrowers do not have to make payments while they're in school or during their grace period, a period of six months after they graduate or leave college. Even though payments aren’t required, most federal student loans do accrue interest while you’re in school.

With private student loans, you might have to make payments while you're in college. Private lenders typically have several in-school repayment options. Depending on the lender, you may be able to choose from the following plans:

Immediate: As soon as the loan is disbursed, you begin making full principal and interest payments each month.

Interest-only: After the loan is issued, you make monthly payments to cover the accrued interest while you're in school. Once you graduate, the payments increase, so you also pay toward the principal.

Fixed: With a fixed payment plan, you pay a specific amount, such as $25 per month, while in college. Once you graduate, the payments increase to cover the principal and interest.

Deferred: If you opt for deferred repayment, you don't have to make any payments until after you graduate. Because interest accrues during your time in school, the deferred payment plan has the highest overall repayment cost.

Where federal student loans really stand out is in borrower protection. Depending on your situation, you may qualify for the following options:

If you're sick or unemployed: If you become seriously ill or lose your job, you may be eligible for a federal deferment program. With these programs, you can postpone your payments for several months at a time.

If you return to school: If you decide to return to school to earn another degree, you can defer your federal student loan payments until after you graduate from the new program or leave school.

If your payment is too high: If you cannot afford the monthly payments under a standard 10-year repayment plan, you may be eligible for an income-driven repayment (IDR) plan. The payments are based on a percentage of your discretionary income, and some borrowers qualify for payments as low as $0.

However, the OBBB made changes to borrower protections. As of July 1, 2027, unemployment and financial hardship deferment programs won't be available. For borrowers who take out new loans on or after July 1, 2026, the current IDR plans will not be available; you'll only be able to choose from the new standard repayment plan and the new Repayment Assistance Plan.

Federal student loans are often eligible for loan forgiveness programs. For example:

Public Service Loan Forgiveness: Borrowers may qualify for Public Service Loan Forgiveness (PSLF) and get up to 100% of their outstanding loans forgiven after meeting the program's eligibility requirements. They must work for an eligible nonprofit organization or government office full-time for at least 10 years and make 120 qualifying monthly payments.

Teacher Loan Forgiveness: Teachers who teach high-need subjects in low-income schools or education service agencies for at least five years can qualify for up to $17,500 of loan forgiveness.

Private student loans aren't eligible for federal loan forgiveness programs like PSLF or Teacher Loan Forgiveness. But they may qualify for state-based loan repayment programs based on your employment, or for employer repayment assistance.

Although the OBBB made major changes to the federal student loan program, federal loans are still a good starting point for most students. Particularly for undergraduate students without established credit histories, federal loans give you a relatively low-interest way to pay for your education.

However, private student loans may have a role in completing your degree if you reach the federal annual or aggregate borrowing limits (or if you don't qualify for federal student loans). Taking out a private loan could allow you to complete your program and earn a degree you otherwise wouldn't be able to finish.

This article was edited by Alicia Hahn.

Few people can afford to pay for college in cash. After scholarships and grants, financial experts almost always recommend using federal student loans before turning to other financing options. Historically, federal loans had lower rates, more favorable repayment terms, and more borrower protections than private student loans.

However, President Trump's One Big Beautiful Bill (OBBB) law made sweeping changes to the federal student loan system and eliminated some of the benefits that made federal loans so appealing.

With these changes in mind, are federal student loans still a good idea? Here's what to know about the changes and how federal loans now compare to private student loans.

At nearly 1,000 pages long, the OBBB is a massive budget and tax law that affects many sectors of the U.S. economy, including changes to federal student loans.

If you need to borrow money to pay for college in the future, here's how federal student loans stack up against private student loans.

Most of the OBBB's provisions won't go into effect until July 1, 2026, so those taking out loans for the 2025-2026 academic year will be unaffected.

Federal student loans are available to U.S. citizens and legal permanent residents attending eligible schools; there are no minimum income requirements, and most federal loans don't involve credit checks.

Private student loans have much stricter eligibility requirements. To qualify for a loan, you usually need a reliable source of income (or a relative or friend to co-sign your loan application) and good to excellent credit.

With private student loans, lenders usually allow you to borrow up to 100% of the school-certified cost of attendance for an undergraduate degree. With federal loans, borrowing limits apply. Here's what that will look like starting July 1, 2026.

Undergraduate students: For undergraduate students, the annual maximum ranges between $3,500 and $12,500, with the maximum borrowing amount based on your dependency status and year in school. You can borrow up to a max of $31,000 for your undergrad education if you're a dependent student, while independent students can borrow up to $57,000 in aggregate.

Graduate students: If you're studying in a graduate program, such as a master's degree, you can borrow up to $20,500 annually with a total maximum of $100,000.

Professional students: Borrowers studying in a professional program, such as those in law or medical school, can borrow up to $50,000 annually with an aggregate max of $200,000.

Parents of undergraduates: Parents will be limited to $20,000 per year per student in Parent PLUS Loans, up to an aggregate maximum of $65,000.

A fixed-rate loan has the same annual percentage rate (APR) for the entirety of the loan, while a variable-rate loan's APR changes along with market conditions. Federal student loans always have fixed interest rates, while private loans can have fixed or variable rates.

Right now, private student loans can be tempting compared to federal student loans. Federal loans normally have lower interest rates, but some borrowers can qualify for lower rates on private loans if they have excellent credit.

Private loans rarely have origination or disbursement fees, but these costs are standard for federal loans. Depending on the type of federal student loan you take out, the fee currently ranges between 1.057% and 4.228%.

With most federal loans, you have six months after you graduate or drop below half-time status before you have to start making payments toward your loans. This period, known as the grace period, gives you time to get a job and get your finances in order before worrying about loan payments.

Private student loans don't always have generous grace periods; depending on the lender and the payment plan you chose when you took out the loan, you may have to make payments while you're still in school.

After the OBBB is fully enacted, new federal loan borrowers will have just two repayment plans to choose from: the standard repayment plan and the new Repayment Assistance Plan, so you'll have between 10 and 30 years to repay your loans.

Your options with a private loan are even more limited. You can typically choose a term between five and 15 years when you take out the loan, and you have to stick to that repayment plan, regardless of your income.

With the OBBB in place, federal student loan borrowers may still qualify for loan forgiveness under the Public Service Loan Forgiveness (PSLF) program. Under PSLF, if you make 120 monthly payments under the new Repayment Assistance Plan while working for an eligible nonprofit organization or government agency for 10 years, the government will forgive your remaining loans.

Private student loans aren't eligible for PSLF.

The OBBB eliminated two major protections for federal loan borrowers: unemployment and financial hardship forbearance. However, federal borrowers can qualify for other forms of deferment or forbearance, such as military service or in-school deferments.

Private student loans tend to have stricter repayment terms and fewer deferment borrower protections than federal loans, and deferment or forbearance options vary by lender.

Despite the changes the OBBB made to the federal student loan system, federal loans still have more repayment options and protections than most private loan lenders. However, a private loan may be a good option in the following circumstances:

If you reach the annual or aggregate borrowing limits for federal student loans and need cash to finish your degree, taking out a private student loan to cover the remaining balance could be a good idea. You can borrow a relatively small amount to pay for your education and complete your program.

For borrowers trying to decide between a federal loan and a private loan, one aspect to consider is your credit. If you have excellent credit and a steady source of income (or have a parent or relative who can co-sign a loan application), you may qualify for a lower interest rate with a private loan than is possible with a federal loan.

For example, if you're an adult returning to school to earn a master's degree, you may have established a solid credit history and a strong FICO credit score. Your credit could allow you to secure a loan with a significantly lower rate than the 7.94% or 8.94% currently available on federal graduate school loans.

Private student loan companies usually give their lowest-advertised rates to borrowers with excellent credit who select shorter repayment terms, such as a term of five or seven years. If you need a small loan to cover your remaining education and can comfortably afford the payments of a shorter loan term, a private loan may have a lower rate. And, thanks to the shorter term, you'll pay it off faster.

The OBBB's changes have made some borrowers nervous, and some are considering student loan refinancing to switch their federal loans into private loans.

But you should think twice before refinancing. Even with the OBBB's changes, federal loans still have more protections and benefits than most private loans. And only borrowers with outstanding credit scores will qualify for the lowest refinancing rates, so student loan refinancing isn't advantageous for everyone.

As of 2025, 42.5 million people have outstanding federal student loans. Of those, approximately 12.3 million — about 29% of borrowers — are currently enrolled in an income-driven repayment (IDR) plan. These plans provide significant relief, giving borrowers more affordable monthly payments.

President Trump's One Big Beautiful Bill (OBBB) overhauled federal student loans and their repayment options. The changes will have a major impact on both current and future student loan borrowers. And, depending on what loans you have, you may have a limited amount of time to take action — or risk losing repayment options permanently.

The OBBB made sweeping changes, but when they go into effect varies by provision. Whether you have existing loans or plan on taking out loans in the near future, here's what you need to know.

Who it affects: Any borrower who takes out a federal student loan on or after July 1, 2026

When it goes into effect: July 1, 2026

The current loan system's standard repayment plan requires fixed monthly payments over 10 years. The OBBB scraps that design and introduces a tiered repayment schedule based on borrowers' loan balances.

The new standard repayment plan applies to borrowers who take out a new loan — even if they have existing federal loans — on or after July 1, 2026.

Who it affects: All undergraduate and graduate loan borrowers

When it goes into effect: July 1, 2026

The bill creates a new repayment plan tied to borrowers' income, the Repayment Assistance Plan (RAP). Unlike the current IDR plans, the RAP requires all borrowers — regardless of income or dependents — to make payments of at least $10 per month. The new plan bases payments on the borrower's income (minus $50 for each dependent).

For example, say your AGI is $45,000 per year and you have one child. Your payment would be set at 4% of your income or $1,800 per year ($150 per month). But, because you have a dependent child, your payment is reduced by $50 per month, so your monthly payment amount would be $100.

The RAP waives interest that accrues if your payment amount doesn't cover the full amount, but borrowers will be in repayment for 30 years.

Who it affects: Undergraduate and graduate loan borrowers who take out loans on or after July 1, 2026

When it goes into effect: July 1, 2026

Borrowers who take out new loans will have just two repayment options.

"Any borrower who takes a loan on or after July 1, 2026, will only have access to the new standard and RAP repayment plans," said Scott Buchanan, executive director of the Student Loan Servicing Alliance.

New borrowers won't have access to today's IDR plans, extended repayment, or graduated repayment.

Who it affects: Undergraduate and graduate loan borrowers with existing loans

When it goes into effect: July 1, 2028

Legacy undergraduate or graduate borrowers — meaning those with existing loans — have a bit more time before they need to change their payment plans. As long as you don't take out any new loans on or after July 1, 2026, you can continue under any of the following repayment plans for the time being:

Income-Contingent Repayment (ICR)

Income-based Repayment (IBR)

Pay As You Earn (PAYE)

Saving on a Valuable Education (SAVE)

Extended repayment

Graduated repayment

However, the OBBB will phase out most of these options over time, and all borrowers in discontinued payment plans will be required to enroll in a new plan — either IBR, the new RAP, or the new Standard Repayment plan — by July 1, 2028.

Read more: Can you change your student loan repayment plan?

Who it affects: Borrowers who take out new Parent PLUS Loans on or after July 1, 2026

When it goes into effect: July 1, 2026

Under the current system, Parent PLUS Loan borrowers can consolidate their loans with a Direct Consolidation Loan and qualify for an ICR repayment plan (and if they work for an eligible employer, they can qualify for Public Service Loan Forgiveness).

The OBBB eliminates those features; anyone who takes out a new Parent PLUS Loan on or after July 1, 2026, will only be eligible for standard repayment. Parents can't qualify for alternative payment plans or PSLF.

"[Parent borrowers] will not be eligible for RAP or other old repayment plan options," said Buchanan.

"Keep in mind: The new standard plan will flex monthly payments based upon the balance of the loan, offering a lower monthly payment over a longer period for larger balances, which is different from the old standard plan that was set at a 10-year term regardless of balance.”

Who it affects: Current parent loan borrowers

When it goes into effect: July 1, 2026

Parent PLUS Loan borrowers will no longer be eligible for alternative payment plans. For existing borrowers, only those who consolidate their debt by July 1, 2026, and enroll in an IDR plan will have access to alternative payment plans.

If you have not yet consolidated your loans, you must complete the process before June 30, 2026.

"Any Parent PLUS borrower who consolidates or takes out new loans on or after July 1, 2026, would only have access to the standard plan," said Adam Minsky, a student loan attorney.

Who it affects: All student loan borrowers

When it goes into effect: July 1, 2026

For borrowers who cannot afford their payments, consolidating with a Direct Consolidation Loan could provide some relief. It gives some borrowers access to repayment plans they wouldn't otherwise qualify for, and some borrowers can qualify for 30-year terms and get more affordable payments.

Although Direct Consolidation Loans will still exist in the future, the OBBB reduces their usefulness.

"Consolidation will be an option, but one with very little practical value for most borrowers going forward after July 1," said Buchanan.

The new RAP and standard repayment plan have longer repayment terms. And consolidating on or after July 1, 2026, will cause legacy borrowers to lose access to alternative payment plans.

The OBBB completely changed federal financial aid and repayment options, and details are still forthcoming on some updates. For example, the ICR plan will be eliminated, but the deadlines borrowers must meet are unclear.

"We will publish more information about the ICR enrollment deadlines that borrowers must meet before ICR is eliminated in order for them to continue to be able to access the IBR Plan," the Department of Education said on the Federal Student Aid announcement site.

As you adjust to these changes, check in with the announcement page for the latest details. And if you need help understanding your loan options or enrolling in a different repayment plan, contact your loan servicer.

When it comes to paying for college, the federal government is one of the main providers of financial aid and support. In fact, the National Center for Education Statistics reported that 55% of undergraduate students received some form of federal financial aid, including federal grants or federal student loans.

The prevalence of federal financial aid is why the One Big Beautiful Bill (OBBB) — President Trump's sweeping bill that he signed into law in July — is such an important piece of legislation. The OBBB made many changes to federal financial aid that will affect both new and existing students and student loan borrowers.

Most of the OBBB's changes will go into effect on or after July 1, 2026. Whether you're currently in college or will be enrolling next year, here's how the OBBB may affect you.

Pell Grants are a form of federal gift aid for low-income students. Previously, you could only use Pell Grants to pay for degree-granting programs, but the OBBB changed that requirement. Now, students can use Pell Grants to pay for qualifying work training or certificate programs too.

The OBBB institutes new limits for part-time students. Going forward, the maximum a student can borrow will be reduced based on their enrollment status. However, how much it will be reduced and what maximums will apply have yet to be finalized. The Department of Education is developing these limits and will submit them for public comment later this year.

Currently, graduate and professional students can use both Direct Unsubsidized and Grad PLUS Loans to pay for their education. But, the OBBB ends the Grad PLUS Loan program, so they'll no longer be available as of July 1, 2026.

Graduate students will still be able to borrow Direct Unsubsidized Loans after that time.

One perk of Parent PLUS and Grad PLUS Loans was the ability to borrow up to 100% of the total cost of attendance. However, the OBBB set new annual and aggregate borrowing limits.

For parents taking out Parent PLUS Loans to pay for a child's undergraduate education, the limit is $20,000 per year per student, with an aggregate maximum of $65,000.

For graduate students, such as those studying for master's degrees, the maximum loan amount is $20,500 per year. An aggregate limit of $100,000 applies.

For professional students, such as those studying for Juris Doctor (JD) and Doctor of Medicine (MD) degrees, the maximum loan amount is $50,000 per year. An aggregate limit of $200,000 applies.

These new borrowing caps could leave some students with funding gaps, forcing them to seek alternative aid elsewhere.

It's not just current or incoming college students that are affected by the OBBB; the bill also made changes that will affect the 43 million people who have outstanding federal student loans.

Currently, borrowers who cannot afford the payments under a 10-year standard repayment plan can choose from several income-driven repayment (IDR) plans, which set your payments at a percentage of your discretionary income for 20 or 25 years of repayment. After completing the required payments, any remaining amount could be forgiven.

The OBBB ended these repayment plans, so existing borrowers will be transitioned out of these plans by July 1, 2028, and new borrowers won't have access to IDR plans at all. Borrowers with loans made before July 1, 2026, will still be eligible for an updated version of the Income-Based Repayment plan.

With the elimination of the existing IDR plans, borrowers will have just two options in the future: a standard repayment plan and the new Repayment Assistance Plan (RAP). The RAP extends the maximum repayment term to 30 years, and many borrowers will have a higher monthly payment under RAP than they would under the current IDR plans.

After July 1, 2026, parent borrowers will no longer be able to enroll in an existing IDR plan, and they won't be eligible for the new RAP. As a result, the only payment option is standard repayment.

With a standard repayment plan, the loans are paid off in 10 years, so parents will no longer be able to take advantage of loan forgiveness under Public Service Loan Forgiveness (PSLF).

The OBBB ends deferments related to unemployment or financial hardships, so borrowers who lose their jobs or cannot afford their payments will have fewer options for relief.

Under the current loan system, federal student loan borrowers can only take advantage of loan rehabilitation — a process to bring their loans current — once. However, the OBBB allows borrowers to rehabilitate their loans twice, giving borrowers another chance to get their loans on track.

The OBBB extended the tax break that exempts student loans discharged through total and permanent disability discharge from federal income taxes. For borrowers who become disabled, this change provides relief from an unexpected tax bill.

If you applied for the Saving on a Valuable Education (SAVE) plan, the OBBB officially ends that option. Interest has begun accruing on SAVE borrowers' loans, and borrowers are encouraged to enroll in a new payment plan. If you want to make progress toward loan forgiveness, you'll need to enroll in a new plan as soon as possible; you can apply for a new plan online at StudentAid.gov/idr/.

For PLUS Loan borrowers, consider consolidating your loans with a Direct Consolidation Loan so you can enroll in one of the current IDR plans. If you do so, you'll retain eligibility for alternative repayment plans and loan forgiveness. Otherwise, PLUS Loan will only have the standard repayment option.

Contact your loan servicer to discuss any changes to your repayment plans and what options are available.

For federal student loan borrowers, signing up for an income-driven repayment (IDR) plan can be a way to make your payments more manageable. And, as an added perk, you can even use an IDR plan to qualify for loan forgiveness. If you still have a loan balance at the end of your IDR plan term, the government forgives the remainder.

However, President Trump's One Big Beautiful Bill (OBBB) made substantial changes to IDR plans and loan forgiveness, so here's what current and future borrowers need to know.

IDR plans are popular. According to the Office of Federal Student Aid, about 29% of federal loan borrowers are enrolled in IDR plans. There are currently three active plans:

Income-Based Repayment (IBR)

Income Contingent Repayment (ICR)

Pay As You Earn (PAYE)

IDR plans base your monthly payments on a percentage of your discretionary income and offer extended repayment terms of either 20 or 25 years. Depending on your income and family size, you could qualify for a payment as low as $0. That means you could pay nothing each month, but still stay current on your loans and even qualify for loan forgiveness down the line.

For example, say you had $20,000 in Grad PLUS Loans — loans for graduate or professional students — with the current 8.9% rate. Under a standard 10-year repayment plan, your monthly payment would be $226 per month.

If you earned $35,000 per year from your job, you could qualify for an IDR plan. If you signed up for PAYE, your monthly payment would be just $96, and you'd make payments for 20 years. At the end of the loan term in August 2045, your remaining loan balance would be forgiven.

Read more: Do I qualify for student loan forgiveness? What's changed under Trump.

While there are three active IDR options, it’s important to note that significant changes are coming to these plans beginning in July 2026. See what to expect when the Trump admin’s OBBB student loan strategy takes effect.

As of 2025, here are the details for existing IDR plans:

Under IBR, new borrowers — those who took out loans on or after July 1, 2014 — will pay 10% of their discretionary income and are in repayment for 20 years. To qualify, your monthly payment must be less than what you would pay under a 10-year standard repayment plan.

Borrowers who took out loans before July 1, 2024, pay 15% of their discretionary income and can be in repayment for as long as 25 years.

ICR repayment requires the highest percentage of your discretionary income to go toward your payments; under ICR, you pay 20% of your discretionary income. All borrowers enrolled in this plan are in repayment for 25 years.

ICR is notable as the only IDR plan available to borrowers with federal parent student loans, including Direct PLUS or FFEL parent loans. To enroll, parent borrowers must consolidate their loans with a Direct Consolidation Loan; afterward, they can sign up for ICR.

Under PAYE, borrowers pay 10% of their discretionary income, but your payments will never exceed what you would've paid under a 10-year standard repayment plan. PAYE defines discretionary income as the difference between your income and 150% of the federal poverty guideline, and borrowers are in repayment for 20 years.

The Saving on a Valuable Education (SAVE) plan was launched in 2023 to replace the Revised Pay As You Earn (REPAYE) plan. It almost immediately encountered legal challenges, and borrowers enrolled in the plan were placed in interest-free forbearance. The SAVE plan is now essentially defunct, and the Department of Education recommends borrowers switch to another repayment plan.

Borrowers who remain in SAVE are still eligible for a payment forbearance, but their loans began accruing interest again on August 1, 2025 — making this a costly option. Borrowers who take no action to change their repayment plan will be automatically switched to a new plan, although the timeline for this change is unclear.

The U.S. Department of Education previously paused forgiveness for borrowers enrolled in PAYE and ICR plans — however, it has since resumed processing forgiveness applications. Eligible borrowers can now receive IDR forgiveness under the IBR, PAYE, and ICR plans.

Once you've reached the necessary amount of time in repayment, your loan servicer will automatically discharge your remaining student loans, and it will send you a notification detailing how much of your balance was forgiven.

To enroll in an IDR plan, follow these steps:

Visit StudentAid.gov: You can complete the entire application process online. You'll need to have your employment information, family size, and proof of income.

Use the loan simulator: The federal loan simulator can show you how much your payments will be under each of the available repayment plans.

Fill out the application: You can select a specific repayment plan or request that your loan servicer place you in the plan with the lowest possible monthly payment. Once the loan servicer reviews your application and approves the plan, you'll receive a notification with the new payment amount.

Recertify your income every year: Each year, you must update your income and family information, which can affect your payment amount. You can recertify your income online.

Make your payments on time: To stay on track toward loan forgiveness, make all of your required payments on time. If you miss payments, those months will not count toward the time necessary for loan forgiveness.

Related: Will I be taxed on student loan forgiveness?

If you're a parent who took out Parent PLUS Loans to pay for a child's education, you can take advantage of IDR plans, too. However, parent borrowers have to complete an additional step:

You must consolidate your loans with a federal Direct Consolidation Loan first. Once the loan is consolidated, then you can apply for ICR.

President Trump's One Big Beautiful Bill made substantial changes to federal student loans and your repayment options, and those changes will affect IDR plans and loan forgiveness in the following ways:

The OBBB eliminated the existing IDR plans. Beginning in 2026, there will be only one plan for new borrowers: the new Repayment Assistance Plan (RAP). Under this plan, borrowers will likely have higher payments than they would under a current IDR plan. Loan forgiveness is still available, but you'll have to make 30 years of payments to qualify.

Any borrower who takes out new loans on or after July 1, 2026, will only have access to standard repayment or the RAP.

Currently, borrowers can still apply for ICR, PAYE, or IBR plans. However, ICR and PAYE will be phased out, and borrowers will have to transition to IBR, the new RAP, or standard repayment by July 1, 2028.

Parents who take out new loans after July 1, 2026, won't be eligible for ICR or loan forgiveness through an IDR plan. Current parent borrowers can still qualify for loan forgiveness, but only if they take some time-sensitive steps:

Avoid new loans: If possible, avoid taking out new federal loans. If you take out a new parent loan, all of your loans will lose eligibility for loan forgiveness.

Consolidate your loans: All loans must be consolidated with a Direct Consolidation Loan before July 1, 2026. It can take several weeks for your application to be processed, so apply well in advance of the deadline.

Enroll in ICR: You must enroll in ICR — meaning you applied for the plan and were approved — before July 1, 2026.

Stuck with private student loans with high interest rates? Refinancing your private student loans could mean lower monthly payments and paying less interest overall.

This article was edited by Alicia Hahn.