If you help consumers build or rebuild credit, qualify for a mortgage, or manage student-loan debt, major changes are coming that you can’t afford to ignore.
Between 2025 and 2028, the Department of Education will overhaul income-driven repayment plans and introduce a brand-new option called the Repayment Assistance Program (RAP).

These changes will reshape how student-loan payments appear on credit reports, how forgiveness timelines are calculated, and even how lenders determine mortgage approval.

1. The Big Picture: SAVE Is Out — RAP Is In

The government is retiring older repayment plans like SAVE (Saving on a Valuable Education) and REPAYE (Revised Pay As You Earn).

In their place comes RAP — the Repayment Assistance Program, launching mid-2025.

RAP functions much like current income-driven repayment (IDR) options but stretches repayment up to 30 years and uses a new formula to determine affordability.
For many borrowers, RAP may mean lower monthly payments — but once you enroll, you may not be able to switch back to a legacy plan.

2. What Remains Stable Right Now

IBR (Income-Based Repayment) remains the most reliable plan available.
Borrowers nearing forgiveness should stay in or enter IBR now; forgiveness processing has resumed.
PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) remain available until July 1, 2028.
After that, all participants will automatically transition to IBR.
SAVE and REPAYE are being phased out entirely.

3. Critical Deadlines You Must Track

July 1, 2026 — “Legacy” vs. “Budget Bill” Loans
Legacy loans (originated before this date): keep access to IBR and other existing plans.
Budget Bill loans (originated or consolidated after June 30, 2026): lose access to those legacy options and can use only RAP or Standard Repayment.

Action Tip:
If consolidation is necessary, complete it before June 30, 2026 to preserve legacy repayment rights.

July 1, 2028 — PAYE and ICR Sunset
Borrowers still enrolled in PAYE or ICR will be migrated into IBR automatically.

4. Parent PLUS Borrowers: Major Shifts Ahead

Current (“legacy”) Parent PLUS borrowers may now use Income-Based Repayment (IBR) — a major win over the old ICR option.
New Parent PLUS borrowers after July 1, 2026 will have no income-based options at all — only Standard Repayment.

Borrowing caps begin July 2026: $20,000 per year and $65,000 lifetime per child.
These limits are designed to prevent the six-figure Parent PLUS balances that have trapped families for decades.

5. Default Strategy: Rehabilitation vs. Consolidation

Rehabilitation keeps the same loan and preserves forgiveness credit.
Wage garnishment stops after the fifth on-time payment, and completing all nine can restore a positive trade line.

Consolidation creates a new loan and resets the forgiveness clock to zero.
Use consolidation only when forgiveness credit is minimal or multiple servicers complicate management.

CBA Tip:
Think of rehabilitation like finishing an antibiotic prescription — stop early and you erase the progress.

6. Credit & Mortgage Implications

Many lenders still follow the “1 % rule.”
That means instead of counting a borrower’s actual IDR payment, they may assume a payment equal to 1 % of the total balance for debt-to-income (DTI) calculations.

Advise clients to ask upfront:

“Do you count my actual IBR or RAP payment for DTI, or use 1 % of the balance?”
If the lender ignores the real payment, consider shopping for one that uses accurate IDR figures.
This single question can determine whether a borrower qualifies for a mortgage.

7. Compliance & Consumer-Protection Insight

Default collection is now centralized under the Default Resolution Group (DRG).
Some former Guarantee Agencies mishandled loan transfers during COVID; errors can create Fair Credit Reporting Act (FCRA) claims.

Servicers must report accurately under the Higher Education Act (HEA) and the Consumer Financial Protection Bureau (CFPB) oversight.

If a servicer misreports status, borrowers have the right to dispute inaccuracies.
Credit professionals should document communications and assist clients with compliant dispute letters.

8. What Credit Professionals Should Do Now

Audit every client’s StudentAid.gov record — confirm loan types and origination dates.
Identify current repayment plan and whether forgiveness credit has accrued.
Avoid post-2026 consolidations that would convert legacy loans.

Prepare for RAP comparisons using income, family size, and balance scenarios.
Review credit reports for misreported student-loan data and dispute errors properly.
Educate clients on new borrowing limits and the importance of developing repayment skills — not just chasing forgiveness.

9. The Bigger Message: Skills and Wisdom Still Matter

While policies change, financial wisdom remains the foundation.
God gives us discernment and the ability to learn — it’s our job to use them.
Helping clients develop the skills to manage debt, rebuild credit, and make informed financial decisions is what sets true professionals apart.

Final Takeaway

These new student-loan rules aren’t just administrative changes — they will redefine how repayment, forgiveness, and credit intersect for years to come.

Stay proactive, document carefully, and guide clients with both knowledge and integrity.
At The Credit Business Association, we equip professionals like you to stay compliant, credible, and ahead of the curve.

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