Federal Student Loan Program Provisions Effective Upon Enactment Under the One Big Beautiful Bill Act

Dear Colleague:

On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (P.L. 119-21) (OBBB) into law. The OBBB contains numerous provisions that amend the Higher Education Act of 1965 (HEA) and impact the administration of Title IV, HEA programs. Many of the changes under the OBBB will be implemented on July 1, 2026 and over the subsequent years. However, several changes made by the OBBB became effective upon enactment. This Dear Colleague Letter (DCL) addresses the changes that became effective upon enactment. Additionally, there will be forthcoming regulations and guidance on the other provisions of the OBBB later this year.

The OBBB eliminates the requirement that borrowers have a partial financial hardship to qualify for enrollment in an income-based repayment (IBR) plan authorized under section 493C of the HEA. A borrower is considered to have a partial financial hardship if the payment amount calculated under a standard 10-year repayment plan exceeds the amount calculated under the IBR plan. This change is effective upon enactment and the Department is currently working with its student loan servicers to remove the partial financial hardship eligibility requirement from the IBR enrollment process.   

Because of this change, borrowers who have loans made on or after July 1, 2014 and before July 1, 2026, and did not qualify for partial financial hardship, are now eligible for the IBR plan. This IBR plan requires payments of 10 percent of discretionary income and has a repayment period of 20 years, with any remaining balance cancelled. In contrast, prior to this change, these borrowers only had access to the Income Contingent Repayment plan, which requires payments of 20 percent of discretionary income and loan cancellation after 25 years.

The OBBB allows borrowers with a consolidation loan that repaid a Parent PLUS Loan to enroll in an IBR plan effective upon enactment. The Secretary will provide additional information to its federal loan servicers and update the Studentaid.gov website when the system is available to enable such borrowers to enroll in IBR.

The OBBB reduces the amount of a loan that a student may borrow for an academic year if the student is enrolled in a program of study on less than a full-time basis during that academic year. This reduction in the annual loan limit will be made in direct proportion to the degree to which the student is not enrolled full-time, rounded to the nearest percentage point.

The Department is currently developing the schedule of reductions that is required by the OBBB and will submit it for public comment later this year. Once public comments are received and reviewed, the revised schedule of reductions will be issued by the Secretary and used to determine the reduction in the annual loan limits for students who are enrolled less than full-time for subsequent academic years (2026-27 and beyond). Institutions will be required to use this schedule of reductions when reducing the annual loan limits for all students who are not enrolled full-time in those academic years.

The OBBB amends the Public Service Loan Forgiveness (PSLF) program to allow for payments made under the newly created Repayment Assistance Plan (RAP) to count toward loan forgiveness, if all other eligibility criteria are met. The RAP was created by the OBBB and will be in effect no later than July 1, 2026. This PSLF provision is effective upon enactment, meaning that whenever the Department launches the RAP program, borrowers will be able to immediately get credit for PSLF under RAP.

The OBBB delays implementation of the Biden Administration’s Borrower Defense to Repayment regulations under 34 CFR Part 685, Subpart D. The previous Trump Administration’s Borrower Defense to Repayment regulations that were effective beginning July 1, 2020, will be effective as if the regulations were never amended during the Biden Administration for loans originated before July 1, 2035. The Biden Administration’s regulations were not enforced prior to enactment of the OBBB because they are unlawful and were enjoined by a federal court. This provision is effective upon enactment and the Department will publish a Federal Register notice shortly that restores the regulations that were in effect on July 1, 2020.

The OBBB delays implementation of the Biden Administration’s Closed School Loan Discharge regulations under 34 CFR 674.33(g), 682.402(d), 685.214. The Closed School Discharge regulations that were effective July 1 ,2020, will be effective as if the regulations were never amended. The regulations relating to those provisions will be effective for any loans originated prior to July 1, 2035. This provision is effective upon enactment and the Department plans to publish a Federal Register notice that restores the regulations that were in effect on July 1, 2020.

We appreciate your attention and cooperation in implementing these initial provisions of the law. We will publish additional information about the OBBB in the weeks and months ahead.

Sincerely,

Jeffrey R. Andrade
Deputy Assistant Secretary, Policy, Planning, and Innovation