Fact Sheet: The Trump Administration Is Simplifying Student Loan Repayment

Over the last several decades, repaying federal student loans has become increasingly complex and difficult for borrowers to navigate. With more than 40 repayment and discharge options available, it is no surprise that 70 percent of borrowers report feeling overwhelmed when trying to manage their loans.

President Trump's historic Working Families Tax Cuts Act (the Act) simplifies student loan repayment by eliminating the fragmented and confusing array of income-contingent repayment plans and shifting to two affordable repayment plans: the Repayment Assistance Plan (RAP) and the Tiered Standard repayment plan. Starting on July 1, borrowers with new student loans will have immediate access to these new plans and select benefits, including a new matching principal payment and an interest waiver for qualified borrowers, which will lower their loan balances.

Repayment Assistance Plan

How does the new income-driven Repayment Assistance Plan work?

The Repayment Assistance Plan will provide borrowers with a simple and affordable option to repay their federal student loans based on their income. Monthly payments are between 1 and 10 percent of a borrower's income, depending on how much they earn. In addition, their payments will be reduced by $50 per month for each of their dependents.

Does the Repayment Assistance Plan provide loan discharges like other income-based repayment plans?

Yes, in limited scenarios where borrowers still have a remaining student loan balance after making 360 monthly, on-time payments. Borrowers in this situation who are enrolled in the Repayment Assistance Plan can take advantage of the new interest waiver and matching principal payment which will significantly help them drive down their balance each month.

How does the Repayment Assistance Plan tackle runaway interest?

The Repayment Assistance Plan will waive remaining unpaid monthly interest when borrowers make on-time monthly payments, ending the cycle of payments that do little to reduce loan balances. Under previous income-driven repayment plans, borrowers often spent years making payments that covered only the interest - or sometimes not even the full interest - leaving balances that were higher than when they started. In fact, student loan portfolio data show that 3 out of 4 borrowers in income-driven repayment plans owe more than they originally borrowed 6 years after entering repayment.

The Repayment Assistance Plan also provides a matching principal payment benefit. If a borrower's on-time payment does not reduce the principal by at least $50, the Department will provide a matching payment of up to $50 each month. These two benefits - the interest waiver and matching principal payment - ensure borrowers always make progress toward paying off their loans.

For example, a borrower with no dependents, an initial income of $35,000, and a loan balance of $20,000 can expect to have about $400 in interest waived over the life of the loan and could receive an additional $2,000 in matching principal payments during their repayment term.

Is the Repayment Assistance Plan affordable for borrowers?

Yes, the Repayment Assistance Plan ensures borrowers' payments are affordable because they are based on income and not on how much borrowers owe. For many borrowers, payments under RAP will be similar to or even lower than those under prior IDR plans.

For example, under prior IDR plans, an unmarried borrower with no dependents who has $35,000 in debt and who earns $45,000 was required to make a monthly payment of $176. Under RAP, not only is the borrower's monthly payment reduced to $150, but $40 in unpaid interest will be waived each month, and the borrower will receive a monthly $50 principal matching payment, ensuring their balance always goes down if the borrower makes an on-time monthly payment. Under prior IDR plans, the loan balance could have increased by as much as $15 every month even though the borrower made the required minimum monthly payment.

Tiered Standard Repayment Plan

How does the new Tiered Standard repayment plan work?

The new Tiered Standard repayment plan offers fixed loan repayment terms in tiers of 10, 15, 20, or 25 years based on the amount borrowed. This plan will automatically provide borrowers who have higher student loan balances with more affordable monthly payments by allowing the borrower more time to repay their loans.

Before the Act, all borrowers were automatically enrolled in a 10-year standard plan no matter how much they owed, often resulting in unaffordable monthly payments. Under the old, 10-year standard plan, a borrower with a $30,000 initial loan balance would be required to make a minimum monthly payment of $341.

Under the Tiered Standard plan, the borrower's minimum monthly payment decreases to $262 because the loan can be repaid over 15 years rather than 10 years under the plan's sliding-scale repayment structure. By extending the repayment period, the new Tiered Standard plan makes monthly loan payments more manageable and affordable.

How does a borrower switch from a current repayment plan to one of the new plans?

Starting July 1, 2026, borrowers will be able to access the new Repayment Assistance Plan and Tiered Standard repayment plan. Certain borrowers currently enrolled in phased out repayment plans with loans made before July 1, 2026, will have until July 1, 2028, to decide between the Repayment Assistance Plan, Tiered Standard plan, or the Income-Based Repayment (IBR). To apply, borrowers should log in to their StudentAid.Gov account; the application takes approximately 10 minutes to complete.

If a borrower provides consent for the Department to obtain their federal tax information directly from the Internal Revenue Service, applying for a new repayment plan becomes even faster and easier since the borrower will not need to manually upload their income information.