Federal student loans changed more in 2025 and 2026 than in any year in a long time. The 2025 budget law (P.L. 119-21) created a new repayment plan, phased out others, and capped how much graduate and professional students can borrow. If you're a student, resident, nurse, pharmacist or physician with federal loans, here's what changed — and what didn't.
What didn't change: PSLF itself
Public Service Loan Forgiveness still works the same way. Make 120 qualifying monthly payments on Direct loans while working full-time for a government or 501(c)(3) nonprofit employer, and the remaining balance is forgiven tax-free. Most academic medical centers, nonprofit hospitals, VA facilities and public health departments are qualifying employers.
What changed is the menu of repayment plans you can use to make those payments.
The new Repayment Assistance Plan (RAP)
RAP launched on July 1, 2026. For loans first disbursed on or after that date, RAP is the only income-driven option (the other choice is a fixed standard plan). Existing borrowers can switch into it.
How payments work:
- Your payment is 1% to 10% of your total adjusted gross income, rising one percentage point for every $10,000 of AGI above $10,000. Above $100,000, it's 10%.
- Subtract $50 a month for each dependent.
- The minimum payment is $10.
RAP has two helpful features for people with low incomes compared with their debt — which describes most residents:
- Unpaid interest is waived if your on-time payment doesn't cover it, so your balance doesn't balloon.
- If your payment reduces principal by less than $50, the government matches to bring the reduction to $50.
RAP payments count toward PSLF. Outside PSLF, RAP forgives any remaining balance after 360 payments (30 years), and that forgiveness may be taxable.
What happened to SAVE, PAYE and ICR?
The SAVE plan is over, and PAYE and ICR are closed to new loans. Borrowers who were in those plans are being moved to other options, including RAP and IBR, during a transition period. If you were in SAVE, check your account at StudentAid.gov to see which plan you're on now and whether your payment changed.
IBR remains available for borrowers with loans from before July 1, 2026. IBR charges 10% of discretionary income (15% for older loans), with payments capped at the 10-year standard amount. For some higher earners, IBR's cap can make it cheaper than RAP.
New borrowing limits
Starting with the 2026–27 school year, new federal borrowing for graduate and professional students is capped, and Grad PLUS loans are ending for new borrowers:
- Professional students (such as medicine, dentistry and pharmacy): $50,000 a year, $200,000 total.
- Other graduate students: $20,500 a year, $100,000 total.
Students already borrowing in a program may be grandfathered for a limited time. For many medical and dental students, the new caps won't cover full cost of attendance, which means more private loans or other funding. Private loans don't qualify for PSLF or RAP.
What it means for you
If you're: Student
Ask your financial aid office exactly how the caps apply to you, and whether you're grandfathered. Borrow federal first. If you need private loans, compare rates carefully and borrow only what you need. Every dollar of private debt is a dollar PSLF can't touch.
If you're: Resident / fellow
Training is when PSLF pays off most. Make sure you're on a qualifying plan — RAP or IBR — and that your employer qualifies. Certify employment each year. Avoid forbearance: those months don't count toward the 120.
If you're: Employed
If you're partway to PSLF, compare RAP and IBR at your current income. If PSLF isn't realistic, compare refinancing with paying down federal loans directly — but remember refinancing ends federal protections.
Your next steps
- Log in to StudentAid.gov and confirm your loan types, plan and qualifying payment count.
- Run your numbers in the PSLF calculator, comparing RAP and IBR.
- If PSLF isn't your path, see your payoff timeline with the student loan payoff calculator.
- Build your training-year budget with the resident budget planner.
Rules in this area keep shifting. Before making a big decision, check the current details at StudentAid.gov or with a student loan specialist.