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House Republicans' Proposed Income-Driven Repayment Plan for Student Loans: How Reforms in the 2025 Budget Reconciliation Bill Would Affect Borrowers

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Title: House Republicans' Proposed Income-Driven Repayment Plan for Student Loans: How Reforms in the 2025 Budget Reconciliation Bill Would Affect Borrowers
Language: English
Authors: Jason Cohn, Kristin Blagg, Jason Delisle, Urban Institute
Source: Urban Institute. 2025.
Availability: Urban Institute. 2100 M Street NW, Washington, DC 20037. Tel: 202-261-5687; Fax: 202-467-5775; Web site: http://www.urban.org
Peer Reviewed: N
Page Count: 16
Publication Date: 2025
Sponsoring Agency: Arnold Ventures
Document Type: Reports - Research
Education Level: Higher Education
Postsecondary Education
Descriptors: Loan Repayment, Income, Student Financial Aid, Budgets, Legislators, Comparative Analysis, Paying for College, Family Size, Costs, Debt (Financial), Federal Legislation
Abstract: This brief analyzes changes the House Committee on Education and the Workforce proposed to the income-driven repayment (IDR) plans for federal student loans under the fiscal year 2025 budget reconciliation process. The bill was approved in committee in April 2025. If enacted, it would replace existing IDR plans with a new plan (the Repayment Assistance Plan, or RAP) for loans issued on or after July 1, 2026. The RAP uses a new formula for calculating monthly payments, requires 30 years of payments to qualify for loan forgiveness, and includes a monthly interest waiver and matching payments for principal reduction. Borrowers who elect the RAP would not be able to leave the program to use a different plan later, a break from current policy. Key findings include: (1) Monthly payments under the RAP are lower than under existing IDR plans for middle-income single borrowers, but payments are higher for those earnings above $80,000 or below $30,000; (2) The payment formula is not indexed to inflation, and payments will be higher in the future for the same level of income today; (3) Borrowers with incomes that would have been exempt from payments under previous IDR plans would be expected to make payments of at least $10; and (4) Some middle-income single borrowers will make lower total payments under the RAP than under existing options because the interest waiver and principal payments reduce their balances over time.
Abstractor: ERIC
Entry Date: 2025
Accession Number: ED673535
Database: ERIC
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  Data: House Republicans' Proposed Income-Driven Repayment Plan for Student Loans: How Reforms in the 2025 Budget Reconciliation Bill Would Affect Borrowers
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  Data: Urban Institute. 2100 M Street NW, Washington, DC 20037. Tel: 202-261-5687; Fax: 202-467-5775; Web site: http://www.urban.org
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  Data: <searchLink fieldCode="DE" term="%22Loan+Repayment%22">Loan Repayment</searchLink><br /><searchLink fieldCode="DE" term="%22Income%22">Income</searchLink><br /><searchLink fieldCode="DE" term="%22Student+Financial+Aid%22">Student Financial Aid</searchLink><br /><searchLink fieldCode="DE" term="%22Budgets%22">Budgets</searchLink><br /><searchLink fieldCode="DE" term="%22Legislators%22">Legislators</searchLink><br /><searchLink fieldCode="DE" term="%22Comparative+Analysis%22">Comparative Analysis</searchLink><br /><searchLink fieldCode="DE" term="%22Paying+for+College%22">Paying for College</searchLink><br /><searchLink fieldCode="DE" term="%22Family+Size%22">Family Size</searchLink><br /><searchLink fieldCode="DE" term="%22Costs%22">Costs</searchLink><br /><searchLink fieldCode="DE" term="%22Debt+%28Financial%29%22">Debt (Financial)</searchLink><br /><searchLink fieldCode="DE" term="%22Federal+Legislation%22">Federal Legislation</searchLink>
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  Data: This brief analyzes changes the House Committee on Education and the Workforce proposed to the income-driven repayment (IDR) plans for federal student loans under the fiscal year 2025 budget reconciliation process. The bill was approved in committee in April 2025. If enacted, it would replace existing IDR plans with a new plan (the Repayment Assistance Plan, or RAP) for loans issued on or after July 1, 2026. The RAP uses a new formula for calculating monthly payments, requires 30 years of payments to qualify for loan forgiveness, and includes a monthly interest waiver and matching payments for principal reduction. Borrowers who elect the RAP would not be able to leave the program to use a different plan later, a break from current policy. Key findings include: (1) Monthly payments under the RAP are lower than under existing IDR plans for middle-income single borrowers, but payments are higher for those earnings above $80,000 or below $30,000; (2) The payment formula is not indexed to inflation, and payments will be higher in the future for the same level of income today; (3) Borrowers with incomes that would have been exempt from payments under previous IDR plans would be expected to make payments of at least $10; and (4) Some middle-income single borrowers will make lower total payments under the RAP than under existing options because the interest waiver and principal payments reduce their balances over time.
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      – Text: English
    PhysicalDescription:
      Pagination:
        PageCount: 16
    Subjects:
      – SubjectFull: Loan Repayment
        Type: general
      – SubjectFull: Income
        Type: general
      – SubjectFull: Student Financial Aid
        Type: general
      – SubjectFull: Budgets
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      – SubjectFull: Legislators
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      – SubjectFull: Comparative Analysis
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      – SubjectFull: Paying for College
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      – SubjectFull: Family Size
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      – SubjectFull: Costs
        Type: general
      – SubjectFull: Debt (Financial)
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      – SubjectFull: Federal Legislation
        Type: general
    Titles:
      – TitleFull: House Republicans' Proposed Income-Driven Repayment Plan for Student Loans: How Reforms in the 2025 Budget Reconciliation Bill Would Affect Borrowers
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