At Student Loan Tutor, we explain how 2025 brings major changes to federal student loans, including the phase-out of multiple IDR plans, the introduction of RAP, updates to IBR and PSLF, and new limits for PLUS loans. We encourage borrowers to review their current plans, prepare for upcoming tax and policy shifts, and seek expert guidance to navigate these complicated transitions confidently.
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As we move through 2025, the federal student loan landscape is shifting
dramatically. Thanks to recent legislative and regulatory changes, several
income-driven repayment (IDR) plans are being phased out, new options are
emerging, and forgiveness eligibility is being restructured. For student loan
tutors, advisors, and borrowers, staying on top of these changes is critical.
This guide breaks down the major eligibility changes for student loan forgiveness
under the new 2025 rules so you can understand what’s different and what you
need to do.
One of the biggest drivers of change is the One Big Beautiful Bill Act, signed into
law on July 4, 2025. This reconciliation law contains major reforms to federal
student loan repayment and forgiveness programs.
• Phasing out of existing IDR plans (ICR, PAYE, and SAVE) for new loans and
eventually for many existing borrowers.
• Creation of a brand-new Repayment Assistance Plan (RAP), which will
become a core option for many.
• Removal of the “partial financial hardship” requirement for IBR (Income-
Based Repayment), expanding who can qualify.
• Borrower protections and changes in Public Service Loan Forgiveness
(PSLF) eligibility.
• Expanded eligibility: As of July 4, 2025, borrowers no longer need to show
partial financial hardship to enroll in IBR. (this has not been
implemented yet)
• Forgiveness timeline: Under the updated IBR rules, certain borrowers
may now qualify for forgiveness after 20 years (if all loans were disbursed
on or after July 1, 2014) or 25 years, if any loans were disbursed before July
1, 2014
• Resumed forgiveness: In October 2025, the U.S. Department of Education
began notifying roughly 2 million borrowers in IBR that they qualify for
loan discharge, after a pause earlier this year.
• Pause and system update: The Education Department temporarily paused
IBR forgiveness processing to adjust systems after court decisions.
• Tax treatment: Forgiveness for discharges in 2025 will remain tax-free at
the federal level, thanks to a provision in the 2021 American Rescue Plan
— but that exemption is expected to expire at the end of 2025.
• ICR (Income-Contingent Repayment): The OBBB phases out ICR for many
borrowers; existing borrowers will need to transition to another plan (IBR
or RAP) by July 1, 2028.
• PAYE (Pay As You Earn): Also set for elimination under the new law.
• SAVE plan: The Saving on a Valuable Education (SAVE) plan is under legal
challenge and will be phased out.
• For borrowers in these plans who don’t actively choose a new repayment
plan, automatic transitions may apply.
• Launching July 1, 2026: RAP will become fully available for borrowers.
• Payment structure: RAP payments will be based on adjusted gross
income (AGI), with a sliding scale from 1% up to 10% based off of
Modified Adjusted Gross Income.
• Minimum payment: At least $10/month, even for very low-income
borrowers.
• Forgiveness timeline: Remaining balance is forgiven after 30 years (360
payments).
• PSLF eligibility: Under proposed rules, RAP payments will count toward
Public Service Loan Forgiveness.
• Negotiated rulemaking: The Department of Education has launched a
rulemaking process in 2025 to revise PSLF eligibility, repayment, and
program structure.
• Plan eligibility: After phase-outs, eligible plans for PSLF could be limited
to IBR and RAP.
• Employer qualification / service rules: Proposed regulatory changes may
redefine what counts as qualifying employment for PSLF.
• Parent PLUS loans: Starting July 1, 2026, new Parent PLUS loans will face
stricter borrowing limits: $20,000 per student per year, and a lifetime cap
of $65,000 per dependent.
• Graduate PLUS loans: According to recent reports, the Grad PLUS
program will be eliminated in future years.
• Deferment & Forbearance: The OBBB also tightens forbearance rules
(limits on how much time borrowers can spend in forbearance) and ends
certain deferment types, like economic hardship deferment.
◦ If you're on ICR, PAYE, or SAVE, assess whether you need to switch
to IBR or RAP before forced transitions begin.
◦ If you're on SAVE and want to maximize forgiveness-earning
months, consider transferring to another plan, especially if you are
pursuing PSLF.
◦ Confirm how many qualifying payments have been made under
your current plan.
◦ Watch for communications from your servicer: many IBR borrowers
are already being notified of forgiveness eligibility as of October
2025.
◦ Because the federal tax exemption for forgiven student loan debt in
2025 expires at year-end, there may be a rush for discharges
processed by December 31, 2025.
◦ Consult a tax professional: forgiven debt after 2025 might not be tax-
free unless new legislation is passed.
◦ If you’re a current borrower, monitor the rulemaking process (via
ED) to understand how your existing payments will transfer. As long
as no new loans are taken out or consolidations are completed after
July 1, 2026 – Borrowers will still have access to IBR.
◦ Parent PLUS borrowers must have a consolidation completed by
June 30th, 2026 to remain eligible for IBR
◦ For future borrowing (post-July 1, 2026), factor RAP into your long-
term repayment planning (30-year forgiveness, AGI-based
payments). Except for New Parent PLUS loans disbursed.
◦ Work with a Student Loan Tutor to simulate different
repayment/forgiveness scenarios (IBR vs. RAP).
◦ Certify your employment for PSLF if applicable, and consider
consolidation if changing plans helps count more payments.
• Ongoing litigation: The SAVE plan remains legally challenged. Some of the
changes, particularly around IDR and forgiveness, may shift depending on
court rulings.
• Regulatory risk: The negotiated rulemaking process is active, which
means future PSLF and repayment rules could change.
• Administrative delays: The Department of Education’s systems are being
updated, and some borrowers have reported disruptions or service delays
(e.g., for IBR applications).
• Tax policy risk: The federal tax-free status of forgiveness is set to expire ,
creating a tax liability for future discharges after January 1, 2026.
2025 is a pivotal year for student loan forgiveness. With the phase-out of legacy
repayment plans, the introduction of RAP, and the resumption of IBR discharges,
borrowers face both opportunity and risk. Take Control of Your Student Loans.
Get expert help today
Navigating the 2025 student loan forgiveness rules which have become more
complicated than ever. You don’t have to figure it out alone. Whether you're
unsure which repayment plan to switch to, want to maximize PSLF eligibility, or
need help understanding how the new RAP and IBR changes affect your
forgiveness timeline, expert guidance can save you years of payments and
thousands of dollars.
Student Loan Tutor has helped thousands of borrowers reduce their payments,
avoid costly mistakes, and qualify for the maximum amount of legal loan
forgiveness. Our team stays on top of every regulatory update so you don’t have
to.
Book a free consultation with Student Loan Tutor today at
www.studentloantutor.com
Looking for more information about how to navigate the terrain of student loans? Check out more of our most recent blog posts.
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