The One Big Beautiful Bill Act (OBBBA) and Student Loans: What You Need to Know

The percentage of what will be used for the adjusted gross income will increase every $10,000. It will range from 1% to 10%. The breakdown is below.

• 1% of adjusted gross income: more than $10,000 and up to $20,000
• 2% of adjusted gross income: more than $20,000 and up to $30,000
• 3% of adjusted gross income: more than $30,000 and up to $40,000
• 4% of adjusted gross income: more than $40,000 and up to $50,000
• 5% of adjusted gross income: more than $50,000 and up to $60,000
• 6% of adjusted gross income: more than $60,000 and up to $70,000
• 7% of adjusted gross income: more than $70,000 and up to $80,000
• 8% of adjusted gross income: more than $80,000 and up to $90,000
• 9% of adjusted gross income: more than $90,000 and up to $100,000
• 10% of adjusted gross income: more than $100,000

The monthly payment would automatically be $10 a month, which over 12 months would be $120. Please note that the monthly payment will never be less than $10 a month.

The dependents listed on the borrower’s tax return will impact the monthly payment. As $50 is deducted, this could cause the borrower to still have a $10 monthly payment. Please note that the monthly payment will never be less than $10 a month.

If the full, on-time monthly payment is less than the interest that has accrued between the previous due date and the current due date, then the unpaid interest for that month will be subsidized. The interest subsidy will only be applied after the borrower has entered the RAP plan, so any interest accruing prior to RAP will not be subsidized. If the borrower has any periods that are in a nonrepayment status, the interest that accrues during that time will not be subsidized.

If the full, on-time monthly payment does not reduce the principal balance by at least $50, then a matching principal payment up to $50 will be made to make sure the principal balance is decreasing. The matching principal payment will not exceed $50 if eligible.

Federal Student Aid (FSA) will be releasing more information on how the interest subsidy and matching principal payment will work. Please note that there is no set time frame for this information to be available. Please review studentaid.gov for more information.

Yes, if the borrower’s on-time monthly payment is less than $50, they will receive a matching principal payment of what they paid, but not more than what they actually paid. The government will review if the monthly payment is $50 or less than the amount that was paid.

If a borrower decides to leave IBR, ICR, or PAYE and move to the RAP plan, those months will still count towards the overall forgiveness. If the borrower decides to leave RAP and move to IBR, ICR, or PAYE, then that time on RAP will not count towards the overall forgiveness. Examples listed below:

• Borrower 1 has 5 years of qualifying payments on IBR, and they decide to move to RAP. Those 5 years on IBR will count towards the 30 years required for RAP.
• Borrower 2 has 5 years of qualifying payments on RAP, and they decide to move to IBR. Those 5 years on RAP will not count towards the 20-25 years required for IBR.

If the monthly payment amount while on RAP is greater than or equal to the 10-year Standard Repayment Plan, then those monthly payments can count towards IBR, ICR, and PAYE forgiveness plans.

There are certain loan types, like FFEL Program Loans, that will not be eligible for the Tiered Standard Plan and the Repayment Assistance Plan (RAP). If the borrower has a mix of loans that are ineligible for the new plans and have loans that are eligible for the new plans, then the eligible Direct Loans would be placed on either of the 2 new repayment plans and the non-Direct Loans would be placed on one of the existing plans that the loans are eligible for.  Examples below:

• Borrower 1 has FFEL Program loans disbursed 02/02/2003 on the Graduated Plan and the Direct Loans disbursed 10/4/2026 on the Repayment Assistance Plan (RAP).
• Borrower 2 has Direct Parent Plus loans disbursed 10/3/2016 on the Extended Plan, and the Direct Consolidated Loans disbursed 04/05/2024 on Income Based Repayment (IBR) plan. 
• Borrower 3 has Direct Plus loans disbursed 09/16/2027 on Tiered Standard, and the Direct Subsidized Loans disbursed 05/29/2025 on Repayment Assistance Plan (RAP).
• Borrower 4 has a Direct Consolidated loan, didn’t pay off Parent PLUS loans, disbursed 5/1/2023 on RAP and Direct Parent PLUS loan disbursed 3/15/2028 on Tiered Standard.
• Borrower 5 has a Direct PLUS Graduate loan disbursed 5/4/2020 on the PAYE Plan, and a Direct Subsidized loan disbursed 8/4/2026 that is still in an in-school status.

Yes, the institution may set a loan limit that is lower than the maximum amount allowed by law. The same limit will be applied for all borrowers in the same program of study.

If the student is less than full time, they will not be able to borrow the maximum amount of federal student loans. For more information regarding enrollment status impacting educational funds, please contact the Financial Aid Office of the respective school. Examples of enrollment statuses are below:

• Enrolled Full Time
• Enrolled Half Time
• Enrolled Less Than Half Time

An independent student is one of the following but not limited to: 

• At least 24 years old
• Married
• Veteran
• Orphan
• An Emancipated Minor

A dependent student is someone who does not fall under the independent student criteria. 

For a student or a Parent PLUS borrower to qualify for the 3-year student loan interim exception, they need to meet the below requirements:

• Must be enrolled in a program of study at an institution as of June 30, 2026.
• Received at least one Direct Loan or Direct Parent PLUS loan for that program of study before July 1, 2026.
• Enrolled at the same institution and are seeking the same credential (associates, bachelors, graduate, professional) after July 1, 2026, and have not stopped being enrolled at the same institution at any point on/after July 1, 2026.
  • Approved leave of absence is not considered a break in enrollment.
• A student cannot change their credential level and maintain eligibility for the exception.
  • Changing majors within the credential level is allowed.

If the student attends a school that has now closed and the student transfers to another school that does have an arrangement with the closed school (teach-out agreement), then the student will continue to qualify for the interim exception.

Yes, if the student originally qualifies for the interim exception while at the school that is merging with another school, they will still qualify for the interim exception.

Yes, if the student is enrolled in a program of study that will guarantee admission into another degree program, program of study, or working towards multiple degrees at the same time, then the student will not qualify for the interim exception.

These programs are often referred to as:

• Dual Degree Programs
• Joint Degree Programs
• Concurrent Degree Programs
• Double Degree Programs
• Combined Degree Programs

Please note, if the student is questioning if their special program qualifies for the interim exception or not, they should contact the Financial Aid Office at their school.

Some examples include but are not limited to the following:

• Borrower is pursuing both a Master of Business Administration (MBA) along with a Juris Doctor (JD) degree.
• Borrower is pursuing a Doctor of Pharmacy (PharmD) degree while first enrolling in a Bachelor of Pharmacy (B.Pharm) program.
• Borrower is pursuing both a Master of Social Work (MSW) and a Master of Public Health (MPH)

No, if the student is a part of a school where they are attending one school that has an articulation agreement with another school and they transfer to that second school, they will lose eligibility for the interim exception.

An articulation agreement is when two schools have a formal agreement that will outline how the academic credits that are earned at one school will transfer and apply to the second school for another degree.