Education Department Updates Key Student Loan Guidance In Advance Of Huge July Changes

Confirmation Of Restrictions On Student Loan Forgiveness Credit Under RAP

The new guidance confirms what the Education Department’s new regulations seemed to suggest, which is that payments made under the Repayment Assistance Plan, or RAP (a new income-driven repayment plan launching in July) cannot count toward student loan forgiveness under other IDR plans.

Historically, payments that are made under one IDR plan can count toward loan forgiveness under other IDR plans if a borrower switches. So, for example, a borrower who has 10 years of credit toward their 25-year repayment term under the ICR plan would retain that 10 years of credit if they transfer to the IBR plan. This has ensured that borrowers who change IDR plans won’t be penalized or forced to start over on their repayment term.

But following a last-minute change to the new regulations, that won’t be the case for RAP. The department confirmed in last week’s updated guidance that payments made under RAP will not count toward student loan forgiveness under the other IDR plans (including IBR) for borrowers who enroll in RAP and later want to switch plans.

“You can switch between any of the plans for which you’re eligible at any time,” says the latest guidance. “However, if you enroll in RAP, any progress (with one exception) earned toward discharge while in that plan won’t count toward discharge for the IBR, ICR, or PAYE plans if you switch to any of those plans after being in RAP.”

The one exception, says the department, is, “If the monthly payment amount while under RAP is greater than or equal to the 10-year Standard Repayment Plan monthly payment amount, then the month can count toward the IBR, ICR, and PAYE plans.”

Payments under IBR, ICR, and PAYE will still count toward student loan forgiveness for borrowers who switch to RAP, although RAP will have a 30-year repayment term, which is far longer than the legacy income-driven repayment plans. RAP payments will also count toward Public Service Loan Forgiveness, or PSLF, provided all other criteria are met.

Recertification Impacts For Income-Driven Repayment Plans When Taking Out A New Student Loan

One of the biggest changes under the new rules is that borrowers who take out new federal student loans, or consolidate their existing loans, on or after July 1, 2026 will have more limited repayment plan options. These borrowers will lose access to all current repayment plans. Instead, most of these so-called “new borrowers” will have only two repayment plan options to select from for all of their student loans, either a Tiered Standard Repayment plan or RAP (even if their older loans had been in a different plan).

That means that borrowers whose student loans are currently in repayment under one of the legacy plans, such as IBR or PAYE, will have to switch to either the Tiered Standard plan or RAP if they take out any new federal student loan (or consolidate their existing loans) on or after July 1. But until now, it’s been unclear what the process for kicking these borrowers off of their repayment plan would look like. The Education Department’s updated guidance provides clarifications and new insights.

“If your pre-July 1, 2026, loans stay in repayment on an existing IDR plan (i.e., the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE) plans), while the post-July 1, 2026, loan is in a different status (e.g., an in-school deferment), then the newer loan doesn’t affect your autorecertification enrollment” immediately, explains the department. “This means that we will automatically recertify your IDR plan according to your annual recertification date, regardless of the new loan, even after July 1, 2026.”

But once the post-July 1, 2026 loan enters repayment, everything changes for this borrower.

“When the post-July 1, 2026, loan enters repayment, your pre-July 1, 2026, loans must be repaid under either the Repayment Assistance Plan (RAP) or the Tiered Standard Plan, along with the new loan,” said the department in the new guidance. “You’ll lose access to the IBR, ICR, and PAYE plans even if your pre-July 1, 2026, loans previously were enrolled in any of those plans. You must either select RAP or the Tiered Standard Plan to repay all of your loans. If you don’t select one of those plans, then your loan servicer will enroll all of your loans in the Tiered Standard Plan.”

Impact Of Repayment Plan Changes On Student Loan Forgiveness Under PSLF

The Education Department’s new guidance clarifies the relationship between the new federal student loan repayment plan changes and the PSLF program, which allows borrowers to qualify for student loan forgiveness in as little as 10 years if they make payments on Direct loans under eligible repayment plans while working full-time for qualifying nonprofit or government employers.

Payments made on federal student loans under legacy repayment plans that are eligible for PSLF, including all current income-driven repayment plans (IBR, ICR, and PAYE), will continue to qualify for PSLF after July 1, 2026. In addition, payments made under RAP will count toward PSLF, as well (even though RAP payments won’t count toward student loan forgiveness under IBR). But the department clarified and confirmed that payments made under the new Tiered Standard repayment plan will not count toward PSLF.

“The current PSLF-qualifying repayment plans continue to count toward PSLF eligibility, and the Repayment Assistance Plan (RAP) will be added as a PSLF-qualifying repayment plan,” says the new guidance. “Payments made under the Tiered Standard Plan don’t count toward PSLF.”

That means that borrowers who take out any new federal student loans, or consolidate their existing loans, on or after July 1, 2026 and intend on pursuing PSLF will have to enroll in RAP. The new guidance also clarifies when payments must be made under RAP in order for those payments to count toward PSLF.

“For a month to count as qualifying for income-driven repayment (IDR) discharge and PSLF while in RAP, the payment must be both on time and in full,” says the guidance. “An on-time payment is a payment that is received on or before the current month’s due date and after the previous month’s due date, and that payment can’t have been used to resolve delinquency. To make a payment in full, the amount paid in the month must be equal to or greater than the monthly payment amount. Additionally, the payment must be matched to a month with certified qualifying employment.”

Interim Exception For Student Loan Limits

In addition to changing student loan repayment, the upcoming regulations will also impose new limits on borrowing federal student loans starting on July 1, 2026. Current and prospective students, and particularly graduate and professional students, will have significant caps on borrowing going forward. The Trump administration has argued that these caps are necessary to curtail extreme borrowing and bring down the cost of higher education. Critics contend that the limits will drive students to take out private student loans instead (which don’t qualify for federal relief or loan forgiveness programs) or forego an advanced degree.

The new Education Department guidance confirms, however, that students who are currently enrolled in a degree program can potentially qualify for an “interim exception” to the new borrowing limits for federal student loans. The temporary exception would allow them to maintain access to the current limits on borrowing if they are enrolled in a degree program, have already received a student loan for that program, and remain in that program after July 1.

“Some borrowers will qualify for what’s called an ‘interim exception’ regarding when the new loan limits will apply,” reads the guidance. “If you’re ineligible or no longer eligible for the exception, then the new loan limits will apply to you starting on July 1, 2026. If you do qualify for the exception, then the new loan limits will be enforced no later than the 2029–30 award year (i.e., from July 1, 2029, to June 30, 2030), but could be enforced earlier if you take an action that causes you to lose eligibility for the exception,” such as transferring to a different degree program.

But borrowers who qualify for the interim exception will not get any exception to the changes to federal student loan repayment plans that are set to take effect on July 1. Any borrower who takes out any new federal student loans (or consolidates their current loans) on or after this date will be treated as a “new borrower” and will lose access to all legacy repayment plans for their federal student loans, which could limit their options for affordable payments and eventual loan forgiveness going forward.