The “Big Beautiful Bill” and What It Means for Medical Professionals with Student Loans
Updated July 2025
I figured there was nothing more patriotic to do over Fourth of July weekend than read through a brand-new law, hot off the press. In addition to the updated law, the Department of Education also released a new announcement confirming that interest subsidies under the SAVE plan will end August 1, 2025. That’s right—the interest-free ride is officially winding down. More on that below. This newly released bill finally gives us the clarity we’ve been waiting on in the student loan space for the past five years, and I’m eager to walk you through it.
Of course, there are still a few lingering questions—and plenty of prayers that the loan servicers actually read the bill and implement it correctly. But overall, this brings much-needed clarity and a new level of confidence in how we can guide our clients through their student loan strategies.
And honestly? This bill is way more reasonable than we expected.
If you’re a medical professional carrying six figures of federal student loans, this bill changes the repayment landscape in a big way starting July 2026. Here’s a breakdown of the major changes and what they could mean for you—whether you’re aiming for PSLF, long term taxable forgiveness after 20–30 years, or just trying to make a dent in your balance without losing sleep.
The SAVE Plan: Interest Subsidies Ending
In a separate announcement this week, the Department of Education confirmed that the interest subsidy on SAVE will officially end August 1, 2025. This means borrowers on SAVE will start accruing interest again, even if their monthly payments are $0.
We knew this was coming eventually but it feels pretty sudden to drop on us—because this is a big deal for anyone who’s been coasting with interest-free balances under SAVE.
The press release did not clarify whether payments will resume in August as well, or if they'll remain paused while interest starts accumulating. But either way, the key takeaway is this:
If your goal is to simply pay the loans off, the time has come to shift into aggressive payoff mode. But if you’re going for forgiveness—especially PSLF—it may be time to switch to IBR or PAYE if you can afford the change.
And if you're still stuck with a pending IBR/PAYE application from last year—and don’t want to resubmit with a higher income—sit tight, but keep a close eye on your account. If the servicer starts billing you, don’t slip into delinquency while they process your old application (which is unfortunately still buried somewhere in their 1.9 million application backlog).
You can read the official release here:
Department of Education SAVE Plan Update
The New RAP Plan (Repayment Assistance Plan)
Beginning July 1, 2026, the federal government will launch the RAP plan. Think of this as the next generation of income-driven repayment. It borrows some of the better elements from the SAVE plan, keeps things simple, and applies across all eligible borrowers.
Here’s how RAP monthly payments are calculated:
Find your income tier.
(Example: $55,000 salary = 5%. Tip: Take the first digit of your reportable income* and that’s your percentage. $100k+ maxes out at 10%.)Multiply your reportable income by that percentage.
Divide by 12 to get your monthly amount.
Subtract $50/mo for each dependent.
*Reportable income is still the Adjusted Gross Income off your most recently completed tax return (filing separately is allowed), pay stub, or employment contract.
Key features of RAP:
Minimum monthly payment is $10.
No hardship requirement to enroll—anyone can use it.
Interest subsidy: any unpaid interest is fully covered by the government (no more runaway balances like in the old days).
You can still file taxes separately to base your payment on your income alone.
Monthly payments are capped at what it would take to fully pay off your original loan balance (when you started into repayment) over 10 years.
You’re not locked in—you can switch in and out of RAP as needed.
IBR Plan Changes
The Income-Based Repayment (IBR) plan isn’t going away—but it is changing:
There is no longer a financial hardship requirement to enroll.
The cap remains: you’ll never pay more than the 10-year repayment amount based on your original loan balance (when you started into repayment).
Existing borrowers are grandfathered in.
But if you take out any new federal loans after July 1, 2026 (including consolidation loans), you’ll lose access to IBR. You’ll be limited to RAP or the new Standard repayment plan.
PAYE, SAVE, and ICR Plans Are Being Shut Down
These three plans must be officially sunset by July 2028. Here’s what you need to know:
There is no grandfathering. All borrowers must move to a new plan.
If you don’t actively switch, you’ll be automatically moved onto the RAP plan.
They will continue to count toward PSLF and long-term forgiveness until they are shut down.
Now is the time to evaluate whether switching into IBR (if eligible) makes sense—especially if you’ve been on SAVE and are planning for PSLF.
- For those going for long term taxable forgiveness on PAYE, we will also likely need to update our savings goals based on new tax bill numbers with the new repayment plan.
New Standard Repayment Plan for New Borrowers
For federal loans taken out on or after July 1, 2026, there will be a new structure for the Standard repayment plan based on your total borrowing amount:
Less than $25,000: 10-year term
$25,000–$50,000: 15-year term
$50,000–$100,000: 20-year term
More than $100,000: 25-year term
New borrowers will also have the option to switch into RAP if needed.
Note: this new Standard repayment is not the same as the cap payment on the IBR or RAP plan.
New Federal Borrowing Caps (Effective July 2026)
The bill introduces new lifetime borrowing limits to prevent over-indebtedness:
Total federal loan cap: $257,000
For professional school (MD, DDS, DVM, etc.): $50,000 per year, max $200,000
For non-professional graduate school: $20,000 per year, max $100,000
If you’re already in school before July 1, 2026, you’re grandfathered in—no changes needed—as long as you graduate within the next three years.
While we hope that these caps put downward pressure on tuition costs, they could also unintentionally create barriers for lower-income students aspiring to enter medicine in the short term as well. If schools don’t reduce costs accordingly, the gap may force future physicians to seek more restrictive and costly private loans to supplement or reconsider the field altogether—which is a loss for all of us.
Public Service Loan Forgiveness (PSLF) Remains Available
The core PSLF rules remain unchanged. That’s a big relief. A few quick updates:
The new RAP plan will count toward PSLF.
IBR (both new and old) will continue to count.
PAYE and ICR will also continue to count until the plans are terminated in 2028.
Note: The PSLF Buyback Program is still available, but since it was created through Department of Education regulations—not written into law—it remains vulnerable to legal challenges. For now, we don’t recommend relying too heavily on it.
Switching Plans
You will be allowed to switch between repayment plans as needed, including in and out of RAP. But pay attention to timing:
If you take out a new loan after July 1, 2026, your only options will be RAP or the new Standard plan.
If you’re staying with your current loans and haven’t borrowed anything new, you’ll still have access to IBR and possibly other legacy plans like PAYE until they’re phased out.
Key Dates
July 1, 2026: RAP launches. Any new loans taken after this date are not eligible for IBR.
July 1, 2028: PAYE, SAVE, and ICR plans must be terminated. Borrowers will need to elect a different plan or be automatically moved to RAP.
Who Needs to Act Now
- Currently on SAVE?
- If planning to pay the loans off: time to start paying them off directly.
- If planning for forgiveness: moving to PAYE or IBR might be a better alternative to continuing getting credit.
- Currently on PAYE?
- No action needed at this time, but we will want to evaluate if RAP or IBR would be a better option for you before to July 1st 2026 and reevaluate estimated tax bills, if applicable.
- Currently on IBR?
- No action needed.
- Currently on ICR or Standard?
- Let us know ASAP—youmight qualify for a lower payment on IBR now that they removed the financial hardship requirements.
Currently a Parent PLUS borrowers:
Guidance is still unclear. More updates expected.
A Few Emerging Strategies We’re Watching
Consolidating shortly after graduation to bypass the grace period and immediately start receiving RAP’s interest subsidy.
Going on RAP and switching to New IBR around year 19 to benefit from the interest subsides on RAP but the 20yr forgiveness on IBR (still unconfirmed).
Those still in school with 1 year left--we may look at private loans for the final year of school to keep eligibility to the New IBR 20yr plan if aiming for long-term forgiveness. (still unconfirmed as we will need to evaluate the pros/cons of having private loan payments and federal loan payments vs pursuing the RAP plan and going the full 30yrs).
We’ll be evaluating these strategies case by case and I don't doubt that others will emerge as we start to play this game with some new chess pieces. As always, it comes down to your career path, repayment goals, and personal values.
Final Thoughts
So yes—I spent my Fourth of July weekend diving into a few hundred pages of student loan legislation so you don’t have to. And I’m glad I did. For the first time in years, we finally have a clear picture of where federal student loan policy is headed. No more chasing vague Department of Ed blog posts. It’s here, and it’s law.
Are there still a few question marks? Of course. There always are. And we’ll be watching closely to see how the loan servicers interpret and implement this (fingers crossed they actually read it). But this bill gives us something we haven’t had in a long time: a solid framework to build real, actionable strategies around.
If you’ve been sitting on the sidelines waiting for clarity—this is your cue. Whether you’re planning for PSLF, aiming for forgiveness, or just trying to minimize stress while you pay things off, now is the time to revisit your plan.
We’re ready when you are.
If you’re wondering how these changes impact your repayment strategy or PSLF timeline, we’d love to help you map it out.
There’s a lot of misinformation floating around, and so we are offering initial consults on the house for any healthcare professional, to help make sure they’re set up appropriately given these changes.
The views stated in this letter are not necessarily the opinion of Cetera Advisor Networks LLC and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.