Student Loan Payment Increase: What the New 2025 Bill Means for Borrowers

Student Loan Payment Increase: The student loan payment will increase for borrowers compared to the earlier average payment due to the new bill introduced this month and other factors. The borrowers wondering about the loan payment increase and current trends can find out everything here. 

Student Loan Payment Increase

The US student loan program is facing legal issues regarding the forgiveness plan, and now the Trump Administration has passed the One Big Beautiful Bill on July 04, 2025, changing the dynamics of the program. 

The report says the recent borrowers have seen an increase in their monthly payments, which has increased their problems, as many repayment options were removed after the pandemic-era relief and the current changes. 

Around one-third of borrowers have already experienced the increase, which limits them from planning for the future, like planning for retirement or something, as their wages go to repaying the loan. 

A Newsweek report says Gen Z is paying the highest student loan payment due to higher interest rates, which leaves them to pay around $500 a month, when the previous borrowers’ average payment is around $200. 

What increases student loan payments? 

The new bill is one of the major reasons for the student loan payment increase. Let’s see how the new bill increases the payment:

• Repayment Plan Elimination: The new bill will remove the repayment plans and bring them to only two plans – the Standard Plan and the Repayment Assistance Plan (RAP). With the IDR plans, the borrowers used to repay the loan based on their income and reduce their burden and possibility of forgiveness after 20 or 25 years under the SAVE plan. 
• Higher payments under RAP and IBR: The borrowers have to pay higher in comparison to the SAVE or PAYE plan, as the ceiling for the partial financial hardship is removed. With the standard plan, they have to pay a fixed payment for 10 to 25 years, whereas under RAP, it will be an income-based payment, and forgiveness in 30 years. 
• Interest on the SAVE Plan: The Department of Education resumes the interest on the SAVE plan from August 01, 2025, which will bring the borrowers to pay $3000 more in a year. The reports say around 7 million SAVE plan-enrolled borrowers will be affected.  
• New borrowing caps: The borrowing caps for graduate and parent PLUS loans have increased. The graduate lifetime cap is $100,000, parents $65,000 per child, and for medical/law students it is increased to $200,000.  

When are the new bill changes effective?

The borrowers should have some relief as the plan’s elimination and other things will be effective in some time, giving enough time to borrowers. So, if you are a borrower, remember to keep these timelines for the new bill legislations:

• The income-driven repayment plans, such as ICR, PAYE, and SAVE, will be eliminated from July 01, 2028, so you guys have around three years to switch to the new repayment plan. 
• You will have Standard, IBR, and RAP Repayment plans for student loans before July 2026; however, after July 2026, you will have a modified Standard plan and RAP for repayment, which will lead you to higher payments. 
• If you are a parent with Parent PLUS loans, you should know you have until July 01, 2026, to combine your loans into one and sign up for IDR plans before July 01, 2028. If you do that, you will be allowed to stay in older IBR plans, which will be better for repaying the loan from the new repayment plans. 
• The RAP and the new or modified Standard plan would not come into play until July 2026, so you have time to strategize your repayment options.  

What should you do now?

Student loan borrowers should start preparing to deal with the increasing loan payments and the changes the new will come. Here are a few things you can do and prepare for the upcoming changes, as you are aware of all the deadlines:

• First, you should review your repayment plan, as many plans will be eliminated soon under the bill. So, you should review which plan will go well with your goals and can help you repay the loan faster, like in RAP, you will have the loan forgiveness in 30 years, or you will have the option to stay under older plans before the deadline. 
• You must be careful and avoid taking new student loans in 2026 or beyond; otherwise, you will pay higher interest rates. 
• If you are a parent enrolled in Parent PLUS, you should be prepared for the upcoming changes, as the government has brought new rules. You should consider Student loan consolidation to access ICR or other plans because under the bill, if you are enrolled in IDR plans, you can switch to the IBR plan until July 2028.
• Though the RAP plan is not effective now, you should look into the RAP plan and evaluate its options to choose a better plan after the deadlines. RAP seems a better option with a loan subsidy of $50 per month or other benefits, but still, you should consider all aspects before making decisions, as it also has some drawbacks. 
• The PSLF program’s new rules eliminate entities with illegal activities from the program; hence, when you switch jobs or where you work currently, you should consider otherwise you may lose your eligibility for forgiveness. 
• The federal government is cutting down the Department of Education staff and changing some rules, so be careful, as if anything goes wrong, the CFPB or the Department of Education may be unable to help you in any disputes. 

The Student loan payment will increase from next month as the interest will resume on the SAVE plan, and it may go higher with the upcoming bill; hence, explore all your options and choose the plans that will fit with your goals. 

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