What Borrowers Should Know
Key Takeaways
- New legislation impacts current and new student loan borrowers.
- The legislation introduces lifetime borrowing limits.
- Current borrowers in the SAVE and PAYE plans will transition to new plans.
For many dentists, student loans are one of the largest financial obligations early in their careers. Recent legislation and court rulings are now reshaping the federal student loan repayment landscape, and those changes may affect both your monthly payments and your long-term repayment strategy.
The One Big Beautiful Bill Act (OBBB) directly affects student loan borrowers currently in repayment and those about to take out new loans. Certified Financial Planner® and Wealth Advisor Austyn Scott says the legislation not only affects loan repayment. It also puts a cap on the amount students can borrow.
“The legislation introduces lifetime borrowing limits that I think are intended to encourage schools to reduce the cost of higher education,” says Austyn.
The lifetime borrowing limits are:
- Undergraduate – $65,000
- Graduate (Masters) – $100,000
- Professional (Medical, Law) – $200,000
- Lifetime Limit – $257,500
The SAVE Plan is Being Eliminated
The Eighth Circuit Court of Appeals recently directed a district court to finalize a settlement between the Department of Education and the state of Missouri that effectively ends the Saving on a Valuable Education (SAVE) repayment plan.
Created during the Biden administration, SAVE offered some of the lowest monthly payments of any federal student loan repayment option. More than 7 million borrowers enrolled in SAVE have been in administrative forbearance while the legal challenges worked their way through the courts.
With the settlement now in place, the program will be permanently eliminated, and borrowers will need to transition to other repayment plans. The Department of Education is expected to release more guidance on the transition process in the coming weeks.
What Happens to Borrowers in SAVE or PAYE
Borrowers enrolled in the SAVE plan will be able to apply for Income-Based Repayment (IBR) before transitioning to the new Repayment Assistance Plan (RAP). Borrowers will either be placed in a new or old IBR based on their original disbursement date.
Borrowers enrolled in the Pay As You Earn (PAYE) plan will transition to the old or new IBR based on their original disbursement date.
Future Borrowers Have New Repayment Options
Going forward, federal student loan repayment will become more streamlined.
Students taking out federal loans after June 1, 2026, will have two primary repayment options:
Repayment Assistance Plan (RAP)
The RAP bases payments solely on adjusted gross income. Borrowers will pay 1% to 10% of their income each month for up to 30 years, depending on their earnings. For some borrowers interest may get subsidized.
Standard Repayment Plan
The Standard Repayment Plan will allow student loan borrowers to make fixed payments over the course of 10 to 25 years, depending on the loan balance.
Which Repayment Plan is Right for You?
Your Paydown Strategy Should be Part of Your Financial Plan
Early in your career, you may have other debts with higher rates or that have a greater impact on your credit score. You might also be planning to buy a house or buy into a practice. That is why your debt paydown strategy should work with your larger financial plan.
“Student loans don’t have to hold you back from your goals. There are ways to prioritize and plan so you can reach your financial goals,” says Austyn. “Student loans are an investment in you and are considered good debt. Without them, many students wouldn’t be able to take advantage of the earning potential that a career in dentistry provides.”
If you still have questions, our financial planners can help build a personalized strategy that supports your goals today and positions you for long‑term success. To connect with an advisor, set up your free consultation today.
