Stakeholders Weigh In On Latest Federal Student Loan Repayment Options

For student loan borrowers, the past several years have been a rollercoaster ride when it comes to messages about whether they’d ever get their student loans forgiven.

Under the current Trump administration, those ups and downs continued at the start of 2026, when the administration announced plans to garnish the paychecks of delinquent borrowers, then put the plan on hold until this summer.

Wage garnishment — and tax withholdings — are still coming, according to the U.S. Department of Education. The delay is meant to give the Trump administration more time to implement a new income-driven repayment plan called RAP — an acronym for the “Repayment Assistance Plan.”

The Trump administration is touting RAP as a simplified and more generous version of its multiple predecessors, which are known by a variety of different names, from income-based repayment to income-contingent repayment. The plan is being implemented under the Working Families Tax Cuts Act.

“The Act reduces the number of federal student loan repayment plans, eliminating a confusing maze of options and making it easier for borrowers to select either a single standard repayment plan or income-driven repayment (IDR) plan that best meets their needs,” the U.S. Department of Education states.

Experts on student aid say RAP could benefit those who aren’t bringing home decent money, but much depends on how much borrowers know about what their options will be under the new income-driven repayment plan, also known as IDR.

There are currently about 12 million borrowers who are behind on their student loans, and they owe about $334 billion in total.

Sarah Sattelmeyer, who serves as project director for education, opportunity and mobility on the higher education program at New America, a left-leaning policy analysis organization based in Washington, D.C., says IDR is “an important tool for borrowers to ensure their payments remain more affordable than they might otherwise be, especially for those who have periods of lower income.”

 “We know that being enrolled in an IDR plan can help borrowers avoid missing payments and defaulting on their loans, and these plans lead to forgiveness after a certain number of payments,” Sattelmeyer says. “While payments in the new IDR plan (RAP) will be higher for borrowers at the bottom of the income distribution than they are under currently available IDR plans, those making on time payments could receive help with interest and principal payment.”

Dr. Preston Cooper, a senior fellow at the American Enterprise Institute, a right-leaning think tank in Washington, D.C., also noted that RAP could make repayment easier for financially struggling borrowers.Dr. Preston Cooper

“Borrowers can benefit from RAP if their incomes are lower, because their income-based payments could be lower than their payments under the standard plan,” Cooper says.

Cooper noted that RAP comes with a minimum payment of $10 per month — and higher-income borrowers pay more on a sliding scale.

“The maximum payment under RAP, for the highest-income borrowers, is 10% of your adjusted gross income,” Cooper observes. “However, higher-income borrowers may want to just pay their loans on the standard plan, because RAP may not offer a reduction in payments.”

RAP provides a variety of forms of relief in the form of reductions and matching payments. For example, a borrower’s monthly payment can be reduced by $50 per dependent, as long as the monthly payment is at least $10. Further, RAP provides a matching principal payment for borrowers who repay less than $50 per month in principal. The reduction in principal is equal to the lesser of either $50 or the total monthly payment, minus the total monthly principal repaid by the borrower.

RAP is slated to take effect for those with eligible Direct Loans on July 1, 2026. The older income-driven repayment plans will still be available for those with existing loans, but RAP will be the only game in town for those who take out federal student loans on or after July 1. The older income-driven plans will eventually be phased out.

The repayment changes come at a critical time for students who need financial assistance to acquire higher education.

For instance, the Congressional Budget Office released projections in February that show the Federal Pell Grant Program is facing a $5.5 billion shortfall for fiscal 2026. The shortfall could rise to nearly $11 billion in fiscal 2027.

Also in February, New America released a report that identifies 41 universities that “appear to be steering low-income families to Parent PLUS loan debt they cannot afford,” and at the same time providing “large tuition discounts to wealthier students.”

Those universities include 23 selective private universities and 18 public flagship and research institutions, nearly half of which are in the South. The report, produced by New America higher education finance expert Stephen Burd, is titled “The Subprime PLUS Loan Crisis: How Dozens of Universities Steer Low-Income Families to Debt They Can’t Afford.”

“Collectively, these 41 universities, many of whom work closely with private, for-profit enrollment management consultants, spent $2.4 billion of their own financial aid dollars on students who lacked financial need in 2023,” Burd wrote in his report. “Nearly $2 out of every $5 these schools spent on institutional aid that year went to non-needy students — those whom the federal government deems able to afford college without financial aid.”

Meanwhile, the report notes, more than 32,000 families of Pell Grant recipients were “stuck with PLUS loans they took out to pay for their children to attend these institutions.”

“These families carried a median Parent PLUS loan debt load of nearly $30,000 each,” the report notes. “For many of these families, the amount they owed came close to or exceeded their yearly earnings.”

Similar trends are featured in “The Student Debt Crisis: America’s Moral Urgency,” a 2025 book by Dr. Jamal Watson, a contributor to The EDU Ledger and a professor and associate dean of graduate studies at Trinity Washington University.

Dramatic increases in tuition — driven in part by a steady decline in state funding for public universities — have shifted much of the financial burden onto students and their families, Watson writes.

“This trend has accelerated the financialization of higher education,” Watson writes, “with students bearing an ever-larger share of the cost.”

Cooper stresses that student loan borrowers should keep in mind that “payments are due.”

“If you don’t pay your student loans, there will be consequences, including a hit to your credit score,” Cooper says. “Mass student loan forgiveness is unlikely to happen for the foreseeable future.”

Borrowers who default on their loans, that is, go for 270 days without making a payment, could be at risk of getting their wages garnished or their tax refunds seized, Cooper says.

“There is currently an ongoing default crisis — millions of borrowers are behind on their payments and approaching and entering default on their loans,” New America’s Sattelmeyer says.

While wage garnishment and tax withholdings are temporarily on pause, borrowers’ balances “continue to grow as interest accrues, their credit scores face additional damage, and they are not making progress toward paying down their loans or receiving forgiveness.”

“During the pause, the [U.S. Department of Education] should engage in a robust campaign to help borrowers exit default to avoid future financial consequences,” Sattelmeyer says.

The department appears to be taking steps in that direction, urging borrowers in default to explore their options on a studentaid.gov webpage titled “Student Loan Delinquency and Default.”

This article originally appeared in March 5, 2026 edition of The EDU Ledger.