The “One Big Beautiful Bill Act” (OBBBA), signed into law on July 4, 2025, implements significant, cost-saving changes to the federal student loan system. The provisions, which reduce federal financial aid and the student loan program by nearly $300 billion, create an environment where future student loan payments are expected to increase for millions of borrowers.
For colleges and universities, this legislation signals a growing financial complexity for students, directly impacting the overall financial health of borrowers and, consequently, your institution’s Cohort Default Rate (CDR).
Changes for Current Student Loan Borrowers
If a borrower took out loans before July 1, 2026 (and is not a Parent PLUS borrower), they can remain on their current Income-Driven Repayment (IDR) plan only until July 1, 2028. After that, they will be forced out of their existing plans—including SAVE, PAYE, and ICR plans—and into one of two options:
- Income-Based Repayment (IBR): A costlier plan than other IDR options. For instance, a typical single borrower with a bachelor’s degree could pay $3,425 more per year under IBR compared to SAVE.
- The Repayment Assistance Plan (RAP): A new plan that is generally more expensive than the IDR plans it replaces.
This transition will result in higher monthly payment obligations for millions of borrowers currently managing their debt under previous, more affordable plans.
Changes for Future Student Loan Borrowers
For students who take out loans after July 1, 2026, the situation presents a major financial shift:
- Access to all current IDR plans is eliminated.
- They are left with only the new Standard Plan or RAP.
Under RAP, a typical single borrower with a bachelor’s degree would pay an estimated $4,168 more per year than they would have under the SAVE Plan. Additionally, the loan cancellation timeline is extended: borrowers must make payments for 30 years under RAP before being eligible for loan cancellation, compared to 20-25 years under previous IDR plans.
New Federal Lending Caps May Require More Private Loans
The OBBBA also places limits on federal loan access:
- Graduate PLUS is Eliminated: For students enrolling after July 1, 2026, the Graduate PLUS loan program is gone. An average master’s degree student who replaces this with a private loan could see their total monthly student loan costs increase significantly, potentially by $755 to over $1,000 per month.
- Parent PLUS Loans are Capped: New caps of $20,000 annually and $65,000 cumulatively per enrolled dependent will force nearly half of Parent PLUS borrowers—many of whom are low-income—to turn to private loans.
- Lifetime Caps: A new aggregate borrowing cap of $257,500 is placed on all students, a limit that will impact high-debt graduate and professional students.
When federal borrowing limits are reached, students and families often turn to private student loan programs to bridge the funding gap. Colleges with private loan programs can offer flexible options, competitive rates for well-qualified borrowers, and a variety of repayment terms tailored to a student’s individual financial needs.
Proactive Student Support is Essential for Institutional Health
The success of both colleges and their students is mutually dependent. To ensure students can receive the financial means to attend and succeed, institutions must offer robust support to guide their borrowers through the increasing complexity of student loan repayment.
Institutions must proactively guide borrowers through repayment changes. The transition for current borrowers creates a high risk of confusion and delinquency, directly impacting your Cohort Default Rate (CDR).
Our Default Aversion solution provides essential guidance and expert counseling to help your current and exiting borrowers navigate the complex new federal repayment landscape, protecting your institution’s CDR and Title IV eligibility.
Concurrently, our private loan servicing product offers a competitive and responsible resource for students and families who require non-federal financing to complete their degree. Contact us today to ensure your students have a clear path forward.