Congress Alters Student Loan Terms via One Big Beautiful Bill Act

The United States Congress passed the One Big Beautiful Bill Act, which fundamentally alters federal student loan repayment terms and forces some existing borrowers into more expensive, longer-term plans. The legislation phases out several existing programs, including the Pay as You Earn (PAYE) and the Biden-era Save as You Earn (SAVE) plans.

These programs are replaced by two new options: the Repayment Assistance Plan (RAP) and Income-Based Repayment (I.B.R.). Under the previous PAYE system, borrowers paid 10 percent of their discretionary income over 20 years. Under the new rules, those borrowers may face payments of up to 15 percent of their income over a period of 25 to 30 years.

Legal experts suggest that the promissory notes signed by borrowers allow Congress to change the available menu of plans. However, the National Consumer Law Center and Project On Predatory Student Lending, Inc. argue that the move breaks past practice by eliminating programs for borrowers midstream without explanation, abruptly increasing the financial obligations of millions of students.