By ASH IDRISY
Around 43 million Americans have student loans from the federal government, totaling 1.6 trillion dollars. Any small change to these programs would have huge consequences, but there are now monumental, stupendous, historic, or simply BIG, changes coming to student loans thanks to H.R.1 – One Big Beautiful Bill Act (OB3).
The first thing to note is that the changes made by OB3 only affect federal student loans. Nothing in the bill is directly influencing your private loans, but there might be some indirect effects. For example, a lack of federal options might lead people to take out more private loans, which have terms less favorable to the borrower. Second, OB3 mostly impacts the way people who already have student loans can repay their loans. Students taking out loans as of July 1st 2026, will have an entirely new system. In this new system you will only have two repayment options, a fixed amount every month or an income based repayment.
This new income based system, Repayment Assistance Program or RAP, is similar to current Income Based Repayment (IBR). The main difference is how much of your income is used to calculate repayment amounts. Under IBR only your “discretionary income”, an amount you have after paying for housing, groceries, etc. is used to calculate repayment. For most households “discretionary income” is around 15 to 30% of their monthly earnings. However under the RAP, your entire Adjusted Gross Income will be used to calculate loan payments. Your gross income is closer to 100% of your monthly earnings. Therefore under RAP your monthly loan payments will most likely be larger.
For those who already have loans, the people that will be affected the most are ones enrolled in the Saving on a Valuable Education (SAVE) repayment plan, which is around 7.7 million people. Due to a host of legal challenges the loan payments under SAVE have been on pause. The pause will continue but under OB3 the principal amount on the loans have started to accrue interest as of August 1st. If you have a SAVE loan your options are: a) do nothing, b) just make the interest payments, c) change to a different plan. With (a) you don’t have to make any payments, but your loan amount is growing due to the interest. For (b), you are making interest payments only, so the loan itself doesn’t grow, but the average payment on interest alone is estimated to be around $300 per month.
Please note this article is only giving an outline of the changes coming to student loans. There are other changes being made by the Department of Education outside of the OB3. For example the organizations that qualify under Public Service Loan Forgiveness are changing. If you were planning to remove student debt under that program look further into these proposals. With all of these changes the big question is really what can you do now?
First, start with some research. Go to studentaid.gov and get more information about your current loans. You can look up: loan balances, interest rates, repayment plan, and loan servicer. When ready, dig deeper on the specific loan servicer’s website and update your income, change your repayment plan or apply for an affordable plan. Finally, use your free resources: head to your college’s financial aid office and speak to them about these changes and what your best path forward looks like.
As you start making repayments watch out for wage garnishments. Also be mindful that paying the loans with the highest interest rates is the best method mathematically speaking. However, what can actually help when paying down debt is using the so-called “snowball method”. This is where you put all your efforts into paying down your smallest debt first, and when that debt is at zero, you move onto the second smallest, and so-on. Studies have found this is the most effective way for people to reach debt freedom. Whatever path you choose, know that you are not alone, millions and millions of your fellow citizens are facing down this same challenge.
