A new federal law is changing how student aid works, offering both relief and uncertainty for borrowers. The One Big Beautiful Bill Act (OBBBA), signed into law on Jul. 4, 2025, has introduced significant updates to federal student loan repayment plans, according to the U.S. Department of Education’s Federal Student Aid website.
A major change involves expanded access to the Income Based Repayment (IBR) plan. Borrowers are no longer required to prove a partial financial hardship to enroll, and parent PLUS loan borrowers can now access IBR, which was previously unavailable to them. Parent PLUS loan borrowers may access IBR as long as they first consolidate their loans and make one payment under the Income Contingent Repayment (ICR) plan.
“Though OBBBA removes the requirement to have partial financial hardship to enroll in the IBR Plan, monthly payment amounts under IBR will continue to be capped at an amount equivalent to the Standard Repayment Plan,” as stated on the U.S. Department of Education’s Federal Student Aid website. The method of calculating IBR payments remains unchanged, being either 10 or 15 percent of discretionary income based on whether the loans were taken out after or previous to Jul. 1, 2014.
However, these new pathways come with a deadline. Access to the IBR, ICR, and Pay As You Earn (PAYE) plans will be restricted for borrowers who receive a disbursement on a new loan on or after Jul. 1, 2026. Borrowers who need to consolidate their loans to become eligible for these plans must ensure their consolidation loan is disbursed by Jun. 30, 2026. The Department of Education is encouraging applicants to apply for consolidation at least three months before this cutoff date in order to avoid processing delays.
Looking ahead, the OBBBA will eliminate the ICR and PAYE plans entirely in the future. The Department of Education states it is updating its systems to implement the IBR changes and expects the process to be completed by Dec. 2025. In the meantime, loan servicers are holding IBR applications that would have previously been denied. Borrowers are advised to monitor the Federal Student Aid website for ongoing updates as these changes unfold.
