The Final July 1 Student Loan Rules Are Here

The Department of Education officially released the final technical language implementing the repayment changes tied to the One Big Beautiful Bill Act (OBBBA), and the details confirm that July 1, 2026 will mark one of the biggest federal student loan system changes in decades.

While most headlines have focused on the new Repayment Assistance Plan (RAP), the actual technical language revealed several major surprises that could significantly impact borrowers.

Borrowers Who Switch Between IBR and RAP Could Lose Forgiveness Credit

One of the biggest surprises buried in the final regulations is that time spent in RAP may not count toward Income-Based Repayment (IBR) forgiveness if a borrower later switches back to IBR.

This is extremely important because many borrowers are trying to determine whether RAP will become the “better” payment option after July 1. The final language suggests borrowers may need to think more strategically before moving between plans.

Why this matters:

• A borrower pursuing long-term forgiveness under IBR could potentially reset or lose progress if they move to RAP and later return.

• RAP forgiveness is generally tied to a 30-year timeline, while many IBR borrowers qualify for forgiveness in 20 or 25 years.

• Borrowers chasing PSLF may still be protected

This creates a major shift in strategy: choosing a repayment plan is no longer just about getting the lowest monthly payment.

PAYE Borrowers May Be Sitting in One of the Best Long-Term Positions

There is one group of borrowers that may be in a very favorable position moving forward: borrowers who already have access to the Pay As You Earn (PAYE) repayment plan.

The final regulations strongly suggest that borrowers who are already enrolled in PAYE may be able to remain in that plan indefinitely, even after the broader sunset of older income-driven repayment systems on July 1, 2028.

That means PAYE borrowers may preserve:

• Lower discretionary income calculations

• Shorter forgiveness timelines compared to RAP

• Stronger payment protections

• Potentially lower lifetime repayment costs

Why This Matters:

For years, PAYE has been considered one of the most borrower-friendly repayment plans because:

• Payments are capped at 10% of discretionary income

• Forgiveness is generally available after 20 years

• Payments are capped so they never exceed what a borrower would pay under a standard repayment plan

The biggest issue borrowers need to understand is this:

If you already have PAYE eligibility, switching plans later could permanently eliminate your ability to return to PAYE once the sunset period closes on July 1, 2028.

Remember, as July 1 approaches, you should make repayment decisions carefully and with a full understanding of how these new rules may permanently affect their future options.

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