In this episode of the 720 Credit Score podcast, consumer attorney Joshua Cohen breaks down what the new federal bill changes for student loans. You will see what died, what survived, and what is coming next, plus clear steps to avoid default, garnishment, and surprise tax refund seizures.
Frequently Asked Questions
- Which repayment plans died under the bill?
- Which repayment plan survived?
- What is IBR and how are payments set?
- What is RAP and when will it be available?
- How does RAP handle interest and principal differently?
- How long until forgiveness under IBR versus RAP?
- How will family size be counted under RAP for noncustodial parents?
- What happens to borrowers in PAYE or ICR as we approach July 2028?
- Did the bill change whether student loans can be discharged in bankruptcy?
- What happens if I default now that payments have resumed?
- Can Social Security be garnished for federal student loans?
- If I cannot afford payments, should I enroll in an income-driven plan?
FAQ: Which repayment plans died under the bill?
The repayment plans that died are PAYE and ICR, which will sunset in July 2028, and SAVE, which is already dead due to a prior lawsuit. If you are enrolled in PAYE or ICR, you will be migrated to a surviving plan when they sunset.
The practical takeaway is that borrowers should prepare for a transition away from PAYE and ICR while monitoring communications from their servicer about timing and next steps.
FAQ: Which repayment plan survived?
The plan that survived is IBR, income-based repayment, along with existing progress toward forgiveness under that plan. Your accrued qualifying time toward IBR forgiveness continues to count.
This preserves a stable option for borrowers who need income-driven payments based on earnings and family size.
FAQ: What is IBR and how are payments set?
IBR is an income-driven repayment plan that sets your monthly payment based on your gross income and family size. Payments can be very low and can be as low as zero when income is limited.
For most borrowers who cannot afford standard payments, IBR remains the baseline option to keep loans current and protect against default.
FAQ: What is RAP and when will it be available?
RAP is the new Repayment Assistance Program that the bill created, and it is expected to launch in early 2026 and must be available by July 2026. RAP adds a minimum payment of 10 dollars per month and uses tax dependents to determine family size.
Borrowers will be able to choose between IBR and RAP once RAP goes live, which means running the numbers to see which plan lowers lifetime cost.
FAQ: How does RAP handle interest and principal differently?
RAP handles unpaid interest by waiving any interest that your payment does not cover, which stops balances from growing through negative amortization. RAP also adds a principal boost when needed.
If you do not pay at least $50 in principal in a month, the government contributes $50 toward principal, which equals $600 per year and helps balances move downward.
FAQ: How long until forgiveness under IBR versus RAP?
Forgiveness under IBR arrives after 25 years, while forgiveness under RAP arrives after 30 years. That five year difference can change your optimal plan choice.
Borrowers should compare expected payments, interest handling, and forgiveness timelines to decide whether RAP’s balance protections outweigh the longer path to forgiveness.
FAQ: How will family size be counted under RAP for noncustodial parents?
Family size under RAP is based on your tax return and only counts people you claim as dependents. If you are a noncustodial parent and do not claim your child, RAP will not include that child in your family size.
This rule can increase your monthly payment under RAP compared to IBR if you rely on household size that is not reflected on your tax return.
FAQ: What happens to borrowers in PAYE or ICR as we approach July 2028?
Borrowers in PAYE or ICR will be funneled into a surviving plan when those plans sunset in July 2028. You will receive instructions from your servicer about the migration path.
To avoid surprise changes, review your account annually and be ready to pick between IBR and RAP when RAP is available.
FAQ: Did the bill change whether student loans can be discharged in bankruptcy?
The bill did not change bankruptcy discharge rules for student loans. Current discharge pathways remain in place.
That means separate guidance on bankruptcy-based relief still applies and can be evaluated with a consumer attorney.
FAQ: What happens if I default now that payments have resumed?
If you default, federal law allows administrative wage garnishment after a 30 day warning letter, typically up to 15 percent of pay after taxes and health insurance. Federal refunds can also be intercepted.
The most reliable way to avoid default is to enroll in an income-driven plan immediately, which can set payments as low as zero under IBR or 10 dollars under RAP once it launches.
FAQ: Can Social Security be garnished for federal student loans?
Social Security can be garnished up to 15 percent for defaulted federal student loans. The program must leave a protected amount equal to 30 times the federal minimum wage.
This makes prevention more important for seniors and disability recipients, who should enroll in income-driven repayment to avoid default-triggered garnishment.
FAQ: If I cannot afford payments, should I enroll in an income-driven plan?
If you cannot afford standard payments, you should enroll in an income-driven plan because it can reduce your payment to a manageable level and prevent default. IBR is available now, and RAP will add another option in 2026.
Enrollment protects you from garnishment and tax refund seizure and keeps forgiveness on track.
