Late afternoon on Thursday, July 3rd, the House voted to pass the budget adjustment bill. This is a package aimed at significantly reducing taxes and overhauling government spending. President Donald Trump signed the bill on July 4, 2025, reaching a voluntary deadline.
Once the bill is passed, major changes have been made to the federal student loan program, making it difficult for students to be forced to pay by funding education and current student debtors. According to a recent Transunion analysis, the bill comes when millions are already delinquent for federal student loan payments.
The settlement bill will pass along with major changes to the federal student loan program
Experts argue that changes introduced by the settlement bill will make it difficult for students to access higher education. However, borrowers are currently aware of the nature of the change and can plan accordingly.
“Now we have rules, so we can work within these rules and optimize our progress,” says Stanley Tate, student loan attorney at Tate Esq. LLC. “Yeah, that’s a bad thing. But at least there are rules to work within it, and we can adjust the options accordingly and take what’s best for us.”
Changes that are likely to have the biggest impact on student loan borrowers were made in repayment programs, borrowing restrictions and hard work support.
Changes to income-driven repayment plans
The bill halted savings on graduation repayment plans and income-driven plans for income-based repayments (IBR), salary acquisition (payment), income terms (ICR), and valuable education (rescue). Student loans taken after July 1, 2026 only have two repayment options: Standard Plan and Income-Based Repayment Support Plan (IRAP).
Those participating in the currently decommissioned repayment programme must change plans by July 1, 2028 and may have access to standard, IRAP, and IBR plans.
Student loan borrowing restrictions
In addition to the restrictions on new graduate and parent loans, there is also a lifetime cap of $257,500 (excluding parents and loans) for all federal student loans retrieved by individual students. Previously, borrowers were able to withdraw attendance costs for graduates and loans.
Students who are currently enrolled in the program and already borrowed money can use the old limits for the rest of their studies.
Limited difficult support
The bill began with loans made in July 2025, and eliminated the ability of borrowers to postpone student loans due to financial difficulties or unemployment. Student loan borrowers may still be generous, but they can suspend payments for up to nine months in 24 months. Both student loan deferral and generosity suspend loan payments. However, interest still comes from tolerance, which is thanks to more than I did before suspending payments.
What does this mean for borrowers?
“I understand the need to curb the cost of higher EDs, but this is one way to do that. This is to really drop a nuclear bomb on the system and then adapt it to people from there,” Tate says.
And how you need to adjust depends on the type of borrower you are on and where you are on your student loan journey.
Current borrower repayment
According to Tate, the biggest point for people repaying is that they have one of three repayment options: Standard Plan, IBR or IRAP. If you are in one of the repealed plans, you will need to switch to one of these plans. If you do not act, you will be automatically placed in a standard repayment plan. With a fixed monthly payment for 10 years (or up to 30 if you consolidate student loans), this plan may come with the best payments.
If you’re already making income-driven repayments, you’ll probably be a priority to work towards forgiveness and try to make the smallest possible payments. Tate recommends avoiding standard repayment plans and carefully consider the remaining two options (IBR and IRAP). According to Tate, IRAP may seem like a good option for some borrowers, but there are issues.
“(IRAP) sounds good up front, but all these terms and conditions come with the backend, which actually reduces costs much more in the long run. You can’t switch between them. …It defines the size of a family differently.
Future borrower
“We’ll have to pay more attention to our return on investment,” warns Tate.
This is because these changes will have the most impact on new borrowers. New loans made since July 2026 only have two repayment options: a standard repayment plan and an IRAP. There is also a limit to the amount you can get from federal student loans, with graduate loans being limited to a total of $100,000 ($200,000 for specialized programs). Grad Plus Loans, which provided full attendance costs, was eliminated.
Many graduate programs cost nearly $50,000 a year, so these changes may require some students to rely on private lenders. Additionally, private student loan interest rates may be lower, but you may need a cosign to get a private loan. Additionally, these types of loans typically do not have income-driven repayment options or loan waiver programs like federal loans.
“When you’re dealing with hard caps in education, I think it makes much more sense for undergraduate education to pay as little as possible to leave as much space as possible for graduate education,” says Tate, who predicts an increase in student numbers starting at community colleges and moving to state schools.
This strategy could free up more federal loan money for student graduation education.
Of the four main ways to pay for universities (federal student loans, private student loans, scholarships, grants, and out-of-pocket payments), Tate recommends borrowers with the most focus on scholarships and grants. He even suggests hiring a coach or an advisor to help him find that free money.
Parent loan borrower
The bill also limits the amount that can be borrowed for students’ education. If you lend out the entire tuition fee, your parents and loans will have a $20,000 per person per year limit, making it a lifetime cap of $65,000 per child.
Parents who take away their parents and loans after July 2026 have no access to income-driven repayment programs or public service loan forgiveness. The bill allows parents and borrowers to consolidate their one-year loans and register with ICR, the only income-driven repayment plan available to the parent borrower. Once you register, you will eventually be transferred to an IBR plan. If you miss a deadline, you will not be able to access an income-driven repayment plan.
All borrowers:
Although you did not select these new rules, you can choose the following steps to take to set yourself up for success.
“There’s an option to move forward. We find the best (one) of this platter of options that won’t make it a decision and say, ‘What’s the best for me and my family?”, says Tate. “And I think there’s still a way to do that.”
The current plan helps to avoid some issues, such as borrowers having trouble making payments. This is close to the three borrowers facing today.
Federal student loans, millions of delinquents even those who can make payments
A record number of federal student loan borrowers are behind on student loan payments, according to a new analysis by credit reporting agency Transunion. As of April 2025, 31% of borrowers paying on a loan have been more than 90 days. This is the highest number in recorded history. Additionally, according to J, another 4.5 million borrowers are 1-89 days behind, on the path to delinquency.Oshua Turnbull, Senior Vice President and Director of Consumer Loans at Transunion.
While these numbers are phenomenal, what Turnbull is most surprising about this survey is the number of late-paid or delinquent borrowers who appear to be able to make student loan payments.
The analysis found that almost a quarter (22%) of borrowers who were new arrears or defaulted on debt between December 2024 and March 2025 had a Vantage score in the range of 661 to 850. A high credit score indicates a history of payments on time and therefore must indicate your ability to make payments. Approximately 9% of all delinquent accounts have been cured, and by April, over 20% have been cured of delinquent by the time they have been at least 20%.
According to Turnbull, about 3 million people have prime or better credit scores for those who are 1 to 89 days behind, and about a third is at least $1,000 more than they owe on existing debts each month. This shows that many borrowers who are on the delinquent crisis can actually afford student loan payments.
“These are people who are capable of paying, and for some reason… they are on the path to delinquency,” he says. “That 90-day delinquency is surprising and very disappointing as it has a very serious impact on your ability to access credits in the short term.”
The analysis shows that average credit scores fell by more than 60 points following student loan delinquency. According to Turnbull, Super Prime borrowers feel it the most, losing 174 points on average.
As discussed, 22% of borrowers had a credit score of 661 or higher prior to delinquency. However, after 90 days of delinquency, only 2% still scored above 661. This means that almost all credit scores have fallen into prime or subprime range following delinquency.
A score below Prime (661 or higher) will make consumers struggle to qualify for mortgages, car loans and personal loans. They may also find it difficult to get a credit card. If they qualify for a loan, they will likely be charged some of the highest interest rates and have some of the most favorable terms.
What does this mean for borrowers?
There is no reason millions of people are in arrears on federal loans. Some borrowers may simply not know that they have to pay. After a five-year payment suspension, the student loan will be an afterthought, or your contact information has been changed and you have not received any notices. Some people may find it difficult to navigate the chaotic landscape of student loans, but they may not know how and who to pay.
Young borrowers who have graduated to a suspension of payments have never received payments before. That could definitely be an adjustment. Some people struggle to pay as inflation has increased their living expenses.
If you or someone you know is on the road to delinquency or delinquency, these tips can help you:
Find out about student loan information: Sign on to StudentAid.gov using your FSA ID to get all your federal loan information, including who your servicer is, interest rates, interest rates, repayment plans you have registered, if you have currently due payments. You can also check the original loan documents.
Update your contact information: Please check your personal and contact information in your dustentaid.gov account settings to make sure everything is up to date. This includes all your contact information (email, mailing address, telephone number) and name if changed since the loan was retrieved. This will allow you to receive notifications about past payments.
Please contact the servicer: Once you know who your servicer is, contact them with questions about your loan, how to make payments, and if you are struggling to make your payments, contact them with the assistance they provide.
Check the options: In addition to servicers, the Department of Education (ED), which handles a portfolio of federal student loans, also has options for borrowers. This includes income-driven repayment plans, public service loan exemptions, other forgiveness programs, and difficult assistance. For default, visit the ED’s debt resolution page for more information.
You can also consolidate your student loan into one loan with one interest rate and one payment. There are private student loans as well, and if you don’t plan on using the benefits associated with federal loans, you can consider refinancing your student loan.
Seeking support from other sources: If you are overwhelmed by student loans or need to help with repayment navigation, consult a financial advisor, student loan attorney, or The nonprofit focused on helping people in debt.
Missing student loan payments can have a negative impact on your finances and hinder your future life goals, but there are ways to get back on track.
“(Delinquency) has a pretty big impact on your credit score and your ability to access your credit,” Turnbull says. “Consult your servicer and make a plan, especially if you are capable, to avoid the outcome.Be proactive, realizing you are in that crowd. If you know anyone in that crowd, encourage them to be proactive. ”
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