Lori Meadows
Student loan repayment plans are constantly changing, and it can be challenging to keep up with the latest updates. As of 2025, there are approximately 42.5 million people with outstanding federal student loans in the US, and millions of borrowers in the UK. With such significant numbers, even small changes in repayment plans can have a substantial impact. In the US, President Trump's One Big Beautiful Bill (OBBB) has brought about sweeping changes to federal student loans and their repayment options. Similarly, in the UK, the Plan 5 system for students in England starting in 2025 has introduced changes to the repayment earnings threshold, interest rates, and loan write-off periods. With ongoing shifts in student loan repayment plans, borrowers must stay informed about their options and be prepared for future adjustments to ensure they can make the best decisions for their financial situations.
| Characteristics | Values |
|---|---|
| Date of search | 28 August 2025 |
| Number of people with outstanding federal student loans | 42.5 million |
| Number of borrowers enrolled in an IDR plan | 12.3 million (29%) |
| New standard repayment plan | Applies to borrowers who take out a new loan on or after 1 July 2026 |
| New repayment plan | Repayment Assistance Plan (RAP) |
| Loan forgiveness | No longer available on some plans |
| SAVE plan | Repealed by Congress |
| Interest accrual on SAVE plan | Started on 1 August 2025 |
| New payment plans | Available from 1 July 2026 |
| Number of borrowers on the SAVE plan | 7.7-7.8 million |
| Total debt of SAVE plan borrowers | $440 billion |
| Deadline to switch from ICR, SAVE, PAYE and REPAYE plans | 1 July 2028 |
| New plan for students in England starting in 2025 | Plan 5 |
| Repayment threshold for Plan 5 | £25,000 a year |
| Repayment rate for Plan 5 | 9% of earnings above £25,000 |
| Time until loan write-off for Plan 5 | 40 years |
Explore related products
What You'll Learn
Changes to the student loan system
The student loan system has undergone several changes, impacting both current and future borrowers. Here are the key details:
Plan 5 in England
Students in England starting university this year will begin repaying their loans if they earn over £25,000 annually. Repayments are set at 9% of earnings above this threshold, commencing the April after graduation or leaving university. This differs across the UK, with repayment thresholds of £26,065 in Northern Ireland, £28,470 in Wales, and £32,745 in Scotland. Plan 5 has also lowered interest rates, and loans are now written off after 40 years, compared to the previous 30-year period.
Changes to ICR, PAYE, and REPAYE plans
The Income-Contingent Repayment (ICR) plan no longer results in loan forgiveness. Similarly, the Pay as You Earn (PAYE) plan no longer offers debt erasure benefits. As a result, experts advise against these plans. From July 1, 2026, borrowers will gain access to the Repayment Assistance Plan (RAP), an IDR plan calculating bills based on adjusted gross income (AGI). This plan requires minimum payments of $10 per month, and the more you earn, the higher your required payment.
Impact on SAVE Plan borrowers
The SAVE Plan, an income-driven repayment plan, has been phased out, and interest has started accruing as of August 1, 2025. Borrowers will need to make monthly payments that include accrued interest and principal amounts. The Trump Administration is assisting SAVE Plan borrowers in selecting new, legal repayment plans.
FAFSA Form Updates
The Free Application for Federal Student Aid (FAFSA) form for the 2026-27 school year will be available in September 2025. This updated form is simpler, allowing students to easily invite parents or guardians to complete their portion. Additionally, users with a StudentAid.gov account will have immediate Social Security number verification.
PLUS Loan Program Changes
The PLUS loan program for graduate students will no longer accept new borrowers from July 1, 2025, due to a Republican policy law passed by Congress.
FAFSA Student Loan Payment Strategies
You may want to see also
Explore related products
Student loan repayment plans
Standard Plan
The standard plan is the default option for borrowers, with a term of 10 years and fixed monthly payments plus interest. It usually results in the fastest payoff and the lowest total interest paid compared to plans with longer repayment terms. However, the standard plan may lead to higher monthly payments that could be unaffordable for some borrowers.
Income-Driven Repayment (IDR) Plans
IDR plans tie monthly payments to a portion of the borrower's income and extend the repayment term to 20 or 25 years. These plans are suitable for borrowers who want lower monthly payments. The Income-Contingent Repayment (ICR) plan, Pay as You Earn (PAYE) plan, and Income-Based Repayment (IBR) plan fall under this category. However, it's important to note that ICR and PAYE no longer offer loan forgiveness, and experts advise avoiding these plans.
Repayment Assistance Plan (RAP)
Starting on July 1, 2026, borrowers will have access to the new Repayment Assistance Plan (RAP), which will replace all current IDR plans. RAP calculates the borrower's bill based on adjusted gross income (AGI), resulting in higher payments as earnings increase. Borrowers enrolled in SAVE, PAYE, and ICR will be automatically transferred to RAP by July 1, 2028, unless they enroll in the IBR plan before that date.
Plan 5 (England)
Under Plan 5, which applies to students in England starting courses after August 2023, the repayment threshold is set at an annual income of £25,000. Repayments are 9% of earnings above this threshold, beginning in April after graduation or leaving the course. The loan is written off after 40 years, a change from the previous 30-year period.
It's important to regularly review the available repayment plans and their terms, as they are subject to changes over time. Additionally, borrowers can use tools like the Education Department's Loan Simulator to estimate their payments under different plans.
Student Loan Repayment: Paying More Than the Minimum
You may want to see also
Explore related products
Student loan forgiveness
The Income-Driven Repayment (IDR) plans are another option for student loan forgiveness. These plans cap monthly payments based on income and family size, with the possibility of a $0 monthly payment for those with very low incomes. Under IDR plans, the remaining balance on loans may be forgiven after 20 or 25 years of repayment, depending on the specific plan. The Income-Contingent Repayment (ICR) plan and the Pay as You Earn (PAYE) plan are examples of IDR plans that previously offered loan forgiveness, but recent changes have phased out this benefit.
It's important to note that student loan forgiveness may come with tax implications. In some cases, the amount of debt forgiven may be considered taxable income, resulting in a higher tax burden for borrowers. Additionally, different countries and states have varying policies regarding student loan forgiveness and repayment plans. For example, in England, the Plan 5 system, which started in August 2023, sets a repayment threshold of £25,000 per year, with loans being written off after 40 years. In contrast, Scotland, Wales, and Northern Ireland have different repayment thresholds and loan write-off periods.
To navigate the complex landscape of student loan forgiveness, borrowers are advised to seek official guidance from the Department of Education and utilize tools like the PSLF Help Tool. Staying informed about changes to repayment plans and staying vigilant against scams are also crucial steps in managing student loan debt effectively.
Student Loan Write-Off: Tax-Free Relief
You may want to see also
Explore related products
Student loan borrowers' options
The US Department of Education has announced that it will resume collections of its defaulted federal student loan portfolio. The Department has not collected on defaulted loans since March 2020. The resumption of collections will be paired with a comprehensive communications and outreach campaign to ensure borrowers understand how to return to repayment or get out of default.
The Department encourages borrowers with loans in the SAVE Plan to use the Loan Simulator to estimate monthly payments under available repayment plans, determine repayment eligibility, and learn which option best meets their repayment goals. Borrowers who previously submitted an IDR application and selected the Income-Based Repayment, Pay As You Earn (PAYE), or Income-Contingent Repayment (ICR) Plan do not need to submit a new application.
Borrowers in the SAVE Plan will see their loan balances grow when interest starts accruing. When the SAVE Plan forbearance ends, borrowers will be responsible for making monthly payments that include any accrued interest as well as their principal amounts.
For students on Plan 5 (starting after August 2023), any outstanding loan is wiped after 40 years. In Scotland and Wales, this occurs after 30 years, while in Northern Ireland, it's after 25 years. Repayments are 9% of earnings above £25,000, starting the April after graduation or leaving the course. Repayments begin on earnings above £26,065 in Northern Ireland, £28,470 in Wales, and £32,745 in Scotland. If a student's income falls below the income thresholds, repayments will stop automatically and only start again when their income is back over the threshold.
Students and Social Security: Who Pays?
You may want to see also
Explore related products
Student loan repayment tips
Student loan debt can be a significant burden and take decades to pay off. Here are some tips to help manage and repay your student loans more quickly:
- Understand your loan: Keep track of your student loan balance, the type of loan you have, and who your lender is. Federal student loans are the most common and come directly from the government, while private student loans are from private lenders and are often more expensive and less flexible.
- Use repayment tools: Utilize the federal government's loan simulator tools to calculate your student loan payments and ensure you are on the best repayment plan. For example, the Public Service Loan Forgiveness (PSLF) plan forgives your remaining balance after 10 years of working for a government or non-profit organization.
- Plan your finances: Assess your monthly cash flow and budget accordingly. Automating payments from your paycheck can help ensure you stay on budget and make payments on time.
- Repayment strategies: Consider strategies such as the "debt snowflake method," which involves making smaller, more frequent payments to reduce the overall debt. Alternatively, focus on paying off loans with higher interest rates first, as this can save you money in the long run.
- Extra income: Obtaining a part-time job or side hustle can help generate extra income specifically allocated towards paying off your student loans.
- Beware of scams: Be vigilant against student loan scams. Only use reputable sources for information and contact the relevant offices if you suspect you have been scammed.
It is important to stay informed about changes to student loan plans and to seek out official sources of information to make the best decisions regarding your student loan repayment strategy.
Exploring Academic Conference Attendance Costs for Students
You may want to see also
Frequently asked questions
The SAVE plan is an income-driven repayment plan that lowered the monthly payments of many, sometimes to $0.
Interest started accruing on 1 August 2025.
The ICR plan is a federal student loan repayment plan that bases payments on the borrower's income.
The ICR plan will be phased out on 1 July 2028.
In England, you start repaying your student loans in the April after you graduate or leave your course if you earn over £25,000 a year.
