Trump Admin to Launch New Student Loan Repayment Plans on July 1

The Trump administration is eliminating “fragmented and confusing” student loan repayment options, replacing them with two affordable plans beginning next month.

The One Big Beautiful Bill Act, signed into law by President Donald Trump last year, included 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,” the Department of Education said in a June 9 statement.

The new plans offer borrowers two paths to repaying loans, the department said, citing a January 2025 survey from digital banking platform Laurel Road.

According to the survey, conducted among 1,700 adults, “70 percent felt overwhelmed when navigating repayment options, with 76 percent of respondents experiencing an overload of information, underscoring the significant anxiety and confusion faced by borrowers.”

The Education Department said in a May 6 statement that the current student loan portfolio has ballooned to almost $1.7 trillion, with close to 25 percent of borrowers defaulting.

In its recent statement, the department said that RAP provides a repayment option based on the borrower’s level of income, with monthly payments ranging between 1 percent and 10 percent of income. Moreover, monthly payments will be reduced by $50 for each dependent.

In certain scenarios, RAP provides loan discharge for borrowers if they still have an outstanding balance after making 360 timely monthly payments.

RAP offers two benefits for borrowers. First, it waives the unpaid monthly interest if borrowers make their monthly payments on time. Second, RAP ensures that if a borrower’s on-time monthly payment does not reduce the principal by at least $50, the department will provide a matching payment of up to $50 for that month.

“These two benefits—the interest waiver and matching principal payment—ensure borrowers always make progress toward paying off their loans,” the department said.

“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.”

As for the Tiered Standard repayment plan, it offers fixed repayment terms of 10, 15, 20, or 25 years based on the loan amount.

Prior to the One Big Beautiful Bill Act, borrowers would be automatically enrolled in a 10-year plan irrespective of the amount owed, a situation that often led to unaffordable monthly payments.

For example, a borrower with a loan amount of $30,000 would have to make a monthly payment of $341 under the old 10-year plan. But under the tiered plan, the monthly amount can be reduced to $262 by opting for a repayment term of 15 years.

The Trump administration’s simplified repayment plans come amid massive inflation in tuition costs over the decades, according to a 2026 report from JP Morgan.

Between December 1982 and December 2025, tuition costs jumped 914 percent. In comparison, medical care rose by 505 percent, housing by 261 percent, gas by 182 percent, cars by 77 percent, and apparel by 35 percent.

Moreover, between 2005 and 2025, student loan debts rose by 343 percent, auto loans by 116 percent, and credit cards by 68 percent.

Tackling Student Loan Fraud

Efforts are also underway in Congress to tackle fraud in applying for student loans.

On June 10, the House of Representatives passed the No Aid for Ghost Students Act by a vote of 249–172. The bill cracks down on student loan fraud committed by “ghost students” who use stolen or fake identities to secure the aid, according to a statement from the House Committee on Education and Workforce.

Specifically, the bill mandates a “front-end identity fraud screening” for federal student loan applications. The bill also requires flagging of applications posing a high fraud risk. Such applications would then require identity verification before federal funds are disbursed.

Secretary of Education Linda McMahon welcomed the passage of the bill.

“The previous Administration turned off nearly every single fraud prevention measure, allowing billions of taxpayer dollars to be stolen by ‘ghost students’ and other criminals,” McMahon said in a statement.

“The No Aid for Ghost Students Act would build on our efforts that prevented more than $1 billion in student aid fraud and ensure that no future Administration can be derelict in their duties to protect students and American taxpayers.”