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Coming Changes to Student Loan Payments


If you’ve been paying (or struggling to pay) your federal student loans, there had been a safety net for a while. During the COVID-19 pandemic, the federal government put temporary relief measures in place, including widespread forbearance, a payment pause and 0% interest rates on federal student loans.1

Student loan repayments resumed in October of 2023, but even if you missed a payment, your loan servicer didn’t report it to the credit bureaus. This safety net, known as the “on ramp” period, ended in September of 2024; the U.S. Department of Education confirmed it would start reporting late or missing payments to the credit agencies in January 2025.2

Understanding what’s changed and what you can do about it can help you protect your credit score and your financial future.


What’s Changing?

Federal student loans are going through a major shake-up, with many changes being rolled out this year.


Collections Resumed for Defaulted Loans

The U.S. Department of Education began collecting on loans already in default in May 2025.3 This means borrowers who haven’t made payments for more than 270 days could now face wage garnishment, loss of tax refunds, or other collection actions.4


Changes to Repayment Options

President Trump signed H.R. 1, commonly known as the One Big Beautiful Bill Act (OBBBA), on July 4, 2025. The bill phases out several existing income-driven repayment plans, including Saving on a Valuable Education (SAVE), Pay As You Earn (PAYE) and Revised Pay As You Earn (REPAYE).5

Staring on July 1, 2026, the only income-driven repayment (IDR) plans available to borrowers will be the existing Income-Based Repayment (IBR) plan and a new Repayment Assistance Plan (RAP).

RAPs calculate student loan payments based on adjusted gross income (AGI). Your monthly payments can range from 1% to 10% of your AGI (divided by 12), with higher income earners paying a higher percentage of their AGI than lower wage earners.6

By contrast, IBR plans calculate your monthly payments based on your discretionary income, which is the difference between your AGI and a set percentage of the federal poverty guideline for your family size.7

RAPs will also have a minimum monthly payment of $10, whereas some low-income borrowers qualified for $0 monthly payments under other IDR plans.

Borrowers who are currently on SAVE, PAYE, REPAYE, or income-contingent plans — or who get on one prior to July 1, 2026 — have until July 1, 2028, to switch into an IBR or RAP.8 And the IBR plans will only be available for loans disbursed before July 1, 2026.


What This Means for Your Credit Score

With late payments once again being reported, your student loans can have a much bigger impact on your credit than they have in the past few years. If your account slips into delinquency, meaning you’re more than 90 days behind, your loan servicer will report it to one or more of the three major credit bureaus.9 Once that happens, you could see your credit score drop by anywhere from 50 to 80 points or more, depending on where your score started.10

That kind of drop affects your ability to get new credit and can also make borrowing more expensive because lenders use your credit score to determine interest rates.11 Your best defense is to avoid falling behind by choosing a repayment plan you can realistically afford.


Options to Avoid Delinquency and Protect Your Credit

If you’re worried about falling behind or already know your current payment is a stretch, don’t wait until you’re in trouble to explore your options.


Switch to an Income-Driven Repayment Plan

Income-driven repayment plans, including the IBR, adjust your monthly payment based on your income and family size to make them more manageable.

For now, you can still apply for a PAYE, REPAYE, or income-contingent repayment (ICR) plan,12 but keep in mind you’ll need to switch plans in 2028.

Calculator, paper, and pen icon
The U.S. Department of Education started reporting late or missing payments to the credit agencies in January 2025.

You can also apply for an IBR, and you no longer have to demonstrate financial hardship to qualify.13 The new RAP plan should be available by July 2026.


Deferment

Deferment is like hitting “pause” on your payments when life throws you a curveball, like unemployment, medical issues, or going back to school. The length of deferment depends on the type of deferment requested.14 For example, an Economic Hardship deferment lasts up to three years, while a military service deferment lasts the entire time you're on active duty service in connection with a war, military operation, or national emergency.

Only subsidized loans and Federal Perkins Loan qualify for interest-free deferment—the other types of loans continue to accrue interest during deferment. Still, it can keep you from sliding into delinquency while you get back on your feet.

Deferment isn't going away under the OBBBA, but it removes the Economic Hardship and Unemployment Deferment options for borrowers who take out a new federal student loan on or after July 1, 2024.15 These borrowers may still qualify for deferment if they're undergoing cancer treatments, enrolled at least half-time in an eligible college, career school, graduate fellowship program, or approved rehabilitation training program, or on active military service.


Forbearance

Forbearance is similar to deferment in that it temporarily reduces or suspends your payments, but it’s for shorter-term financial struggles. You can apply for forbearance if you're unable to make payments due to financial difficulties, medical expenses, or a change in employment.

Forbearance is still an option under the OBBBA, but for borrowers who take out new loans on or after July 1, 2027, forbearance will be limited to no more than nine months during any 24-month period.15 Currently, student loan borrowers can request forbearance for 12 months at a time.16 If they're still experiencing a financial hardship when the forbearance period ends, they can extend it by up to two additional years.

Interest continues to accrue during forbearance, but it’s worth considering if you need quick relief.17


Loan Rehabilitation or Consolidation

If you’re already behind, don’t panic. There are still ways to reset. Programs like loan rehabilitation or consolidation can bring your account current and stop collections.18


Student Loan Rehabilitation

With student loan rehabilitation, you sign a written agreement with your loan servicer to make nine on-time payments. Your loan servicer bases the payment amount on your discretionary income. Once you complete the rehabilitation process, the default status will be removed from your loan, any collection actions or garnishments will stop, and you'll be eligible for deferment, forbearance, or applying for an income-driven repayment plan.


Student Loan Consolidation

Federal student loan consolidation involves paying off two or more federal student loans with a new consolidation loan. This won't necessarily lower your interest rate, as the rate on your new loan will be a weighted average of the rates on your consolidated loans.19 However, it simplifies monthly payments because you have only one loan to worry about rather than multiple loans. After consolidating, you'll be eligible to apply for other options, including deferral, forbearance and income-driven repayment plans.

If you want to consolidate your loans and still take advantage of an IBR plan, timing is important. To be eligible for an IBR plan after consolidation, you need to consolidate your loans before July, 1, 2026.20 That's because eligibility for an IBR plan is determined by the disbursement date of the consolidation loans, not the original loans.

The key is to act quickly. The sooner you talk to your loan servicer, the more choices you’ll have and the easier it will be to protect your credit.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. U.S. Department of Education, “COVID-19 Emergency Relief and Federal Student Aid,” accessed September 3, 2025. Back
  2. Maria Carrasco, “ED: Delinquent Payments on Federal Student Loans Will Not Be Reported Until January,” National Association of Student Financial Aid Administrators, published October 11, 2024. Accessed September 3, 2025. Back
  3. Washington State Department of Financial Institutions, “Collections on Defaulted Federal Student Loans Resume May 5, 2025,” published May 5, 2025. Accessed September 3, 2025. Back
  4. U.S. Department of Education, “Default,” accessed September 3, 2025. Back
  5. NACAC, “Key Federal Student Aid Changes Now in Effect Under OBBBA,” published July 2025. Accessed September 3, 2025. Back
  6. "How Will Your Student Loan Payment Change With the Repayment Assistance Plan (RAP)?" Saving for College, published August 11, 2025. Accessed September 3, 2025. Back
  7. EDCAP, "Income Driven Repayment (IDR) Calculator," accessed September 3, 2025. Back
  8. Annie Jennemann, “Student loan repayment plans are changing. Here are key dates, things to know,” KCRA, updated July 28, 2025. Accessed September 3, 2025. Back
  9. Nelnet, “Credit Reporting,” accessed September 3, 2025. Back
  10. Andrew Keshner, “End of student loan ‘on-ramp’ means missed payments can hurt borrowers. Here’s how to protect your credit score,” MarketWatch, updated September 30, 2024. Accessed September 3, 2025. Back
  11. Finra, “How Your Credit Score Impacts Your Financial Future,” accessed September 3, 2025. Back
  12. U.S. Department of Education, “IDR Plan Court Actions: Impact on Borrowers,” updated July 9, 2025. Accessed September 3, 2025. Back
  13. U.S. Department of Education, “Federal Student Loan Program Provisions Effective Upon Enactment Under the One Big Beautiful Bill Act,” published July 18, 2025. Accessed September 3, 2025. Back
  14. U.S. Department of Education, "Deferment," accessed September 3, 2025. Back
  15. Congress.gov, "H.R. 1 - One Big Beautiful Bill Act," published July 4, 2025. Accessed September 3, 2025. Back
  16. U.S. Department of Education, "Student Loan Forbearance," accessed August 14, 2025. Back
  17. U.S. Department of Education, “Get Temporary Relief: Deferment and Forbearance,” accessed August 13, 2025. Back
  18. U.S. Department of Education, “Don’t get discouraged if you’re in default on your federal student loan,” accessed September 3, 2025. Back
  19. U.S. Department of Education, "What's the interest rate on a Direct Consolidation Loan?" accessed August 14, 2025. Back
  20. National Consumer Law Center, "Big Bill Means Changes for Student Loan Borrowers: What You Need to Know," published July 15, 2025. Accessed September 3, 2025. Back