InsideTrack2%
Student Loan Repayment: Will Changes Survive Judicial Review? 6%
By Jay D. Jerde4%
7/8/2026, 12:00:00 AM
BS Summary: This article contains 31 faulty reasoning types, including Appeal to Authority, Quote-first Misdirection, and Biased Writer Voice, with Negativity Bias as the most egregious example at 15.7% saturation with 262 hits. Analysis detected 2,010 faulty-reasoning hits from 1,669 analyzed words, generating a BS Score of 21.9% and a BS Rank of 6% (14,968 of 15,847 articles). This article is better (less manipulative) than 94.50% of the article peer group.
July 8, 2026 – New student loan repayment requirements effective July 1 may reduce borrower options – household finances may have to change.
Lawsuits challenging parts of the Trump administration's remake of student loans, just as courts stopped parts of the Biden administration’s efforts, mean the final word has yet to come.
The complexity of federal student loans, subsidized or unsubsidized, and whether or not consolidated, prevents a simple answer for any borrower.
Consolidated loans and some loan programs have more limited repayment options.
Less Forgiving Repayment
The federal government committed itself to post-secondary education with the Higher Education Act of 1965, Pub.
L.
No. 89-329, signed by President Lyndon B.
Johnson as a part of the Great Society.
Students in the 1960s could expect summer jobs to pay their college expenses.
Later generations have faced increasingly tougher economics.
Changes to government financial aid have transformed the original act.
The initial enactment covers 51 pages in Statutes at Large.
Updates to the act through July 4, 202,5 have increased the act’s size to 878 pages.
What was a simple amortized process of repayment within a ten-year period grew into a menu of alternatives.1
Traditional repayment plans before July 1 included:
A “standard repayment plan.”
A “graduated repayment plan” that is “paid over a fixed period of time, not to exceed ten years.”
The “graduated” part means that loan payments increase over time.
An “extended repayment plan” for students owing more than $30,000, either fixed or graduated for as long as 25 years.
Another set of programs comes under what the statute terms “income-based repayment plan” and in the regulations as “income-driven repayment plans.”
2
These plans base repayment on household income compared with a percentage of the federal poverty rate.
Whatever balance remains after the term the federal government forgives – a point of political contention.
The choices are diminishing:
Saving on a Valuable Education (SAVE), a version of Revised Pay As You Earn (REPAYE), which offered the most generous repayment calculations.
It’s ending this year.
Pay As You Earn (PAYE) with payments based on 10% of discretionary income paid over 20 years.
It’s scheduled to be phased out in 2028.
Income-Contingent Repayment (ICR) with payments based on 20% of discretionary income for 25 years.
It’s also scheduled to be phased out in 2028.
Income-Based Repayment (IBR), which offers payments based on 15% of discretionary income for 25 years for loans older than July 1, 2014, or 10% of discretionary income for 20 years for loans newer than that date.
Starting July 1, an “income-based Repayment Assistance Plan” (RAP) based on the student’s adjusted gross income (AGI) for a period of 30 years.3
Republican attorneys general sued President Joe Biden and the Department of Education, arguing they lacked congressional authorization to promulgate SAVE.
The court granted a temporary injunction, stopping the program.4
The Trump administration chose not to defend the lawsuit, which ended in a settlement vacating the administrative rule creating SAVE.
The Department of Education says SAVE will end for existing borrowers as early as Sept. 29, and given the number of borrowers to transfer to new repayment plans, probably later than that.
A Leaner Future
Student loans taken out after July 1 are limited to the RAP and a “standard repayment plan,” called the Tiered Standard Plan, with repayment schedules ranging from 10 years for a principal less than $25,000 to 25 years for a principal of $100,000 or more.5
New post-undergraduate students face stricter borrowing limits.
Professional students – defined as lawyers and nine other professions – may borrow in one academic year no more than $50,000.6
Annual tuition at a private law school is greater than that amount.
The difference will have to come from other funding sources, which will likely be more expensive.
The new aggregate borrowing limit for a professional student is $200,000.7
Lawsuits are currently challenging both the limited definition of professional degrees, which excludes nurses and some other medical professionals, and the loan limits.
Public Service Rule
President George W.
Bush signed into law the College Cost Reduction and Access Act, Pub.
L.
No. 110-84, which created PSLF.8 The law passed in 2007 with broad bipartisan support.
Even then, student loan repayment was a concern.
PSLF’s goal is “to encourage individuals to enter and continue in full-time public service employment by forgiving the remaining balance of their Direct loans [with the federal government] after they satisfy the public service and loan payment requirements.”
9
The program allows borrowers who worked at least 30 hours a week in a public service job and made ten years of qualifying monthly payments to obtain forgiveness for the remaining loan balance.10
An eligible job can be in government, a 501(c)(3) nonprofit, or a nonprofit organization providing qualifying public services.11
Changes in qualified employers, and how a federal administration interprets the new regulations, have drawn controversy.
In a March 7, 2025, Executive Order, President Donald Trump commanded the secretary of education to revise PSLF regulations.
The changes would ensure that PSLF does not “subsidiz[e] illegal activities, including illegal immigration, human smuggling, child trafficking, pervasive damage to public property, and disruption of the public order, which threaten the security and stability of the United States.”
“[I]ndividuals employed by organizations whose activities have a substantial illegal purpose shall not be eligible for public service loan forgiveness,” the executive order explained.
The final rule published in the Federal Register on Oct. 31, 2025, effective July 1 made those changes.The new rule, amending 34 C.F.R.
§ 685.219, defines “substantial illegal purpose” to include:
“Supporting terrorism … or by engaging in violence for the purpose of obstructing or influencing Federal Government policy.”
Engaging in transgender treatment by “chemical and surgical castration or mutilation of children.”
“Engaging in the trafficking of children to another State for purposes of emancipation from their lawful parents.”
“[A]iding or abetting illegal discrimination.”
Violating state laws, such as trespassing, disorderly conduct, public nuisance, vandalism, or obstruction of highways.
The secretary of education may make ineligible a PSLF employer who commits a substantial illegal purpose based on the preponderance of the evidence, relying on court judgments, pleas, or settlements.
The ban lasts until completion of a corrective action plan or after ten years with proof of compliance.
Beyond Agency Scope?
A lawsuit filed shortly after the rule’s promulgation raised fears “that a city or county government’s resistance to the administration’s immigration actions, for example, or anti-DEI policies, could lead the secretary to exclude that government’s public workers from loan forgiveness.”
Plaintiffs include sanctuary cities, which “the Trump administration has already accused … of impeding the enforcement of federal law.”
“They worry that a local nurse or first responder could be denied loan forgiveness because their local leaders defied the Trump administration.”
The Department of Education responded that “[it] would have no basis to remove eligibility from nonprofits engaged in work related to immigrant communities, LGBTQ+ individuals, or racial justice if those organizations are following the law.”
Federal district judges in Massachusetts and the District of Columbia last week struck down the new administrative rule as beyond the scope of agency delegation – and that it threatened First Amendment rights.
Wisconsin was among 21 other states and the District of Columbia in joining Commonwealth of Massachusetts v.
U.S.
Department of Education.
The June 30 summary judgment decision in that case illustrates those constitutional challenges that it held justified vacating the rule.
The decision held that the new PSLF rule exceeds the scope of delegated authority and is contrary to law because “Congress spoke plainly and comprehensively on the scope of the term ‘public service job.’”
The statute left no definitional gap to fill.
Although that conclusion is enough under the Administrative Procedure Act to vacate the rule, the decision also explained how the rule was arbitrary and capricious.
In the decision’s analysis, the rule lacked a rational connection to a real problem.
The Department of Education estimated that less than ten employers a year would face disqualification from PSLF.
That “minuscule fraction” isn’t enough for there to be a “real problem” justifying a rule “with such sweeping consequences,” the decision concluded.
The “substantial illegal purpose” definition also lacked objective legal standards, creating a “substantial risk of arbitrary enforcement,” the decision said.
As argued by a consolidated case, National Council of Nonprofits v.
McMahon, the rule engages in viewpoint discrimination – in effect requiring others to adopt the federal government’s policy views – violating the First Amendment, the decision held.
Organizations that “provide services involving diversity, equity, and inclusion [DEI] initiatives; immigrant communities; and gender-affirming care” – even when and where the practices are legal – could face punishment, the decision warned.
At least two plaintiffs allege that they are now experiencing those pressures.
The rule’s effect would deter public service employment, the decision said, contrary to the intent Congress had in creating PSLF.
“Public benefits should be administered under stable, predictable statutory definitions rather than shifting political winds,” American Bar Association (ABA) President Michelle A.
Behnke said in response to the recent rulings.
“PSLF is critical to expanding services to communities nationwide,” she added.
“Rules that are based on political criteria act to destabilize the program, which in turn destabilizes the delivery of critical services to the public.”
Endnotes
1 20 U.S.C. § 1087e(d)(1).
^
2 20 U.S.C. § 1087e(d)(1)(E), “in accordance with” 20 U.S.C. § 1098e; 34 C.F.R.
§ 685.209.
^
3 20 U.S.C. § 1087e(d)(1)(F); 20 U.S.C. § 1087e(q).
^
4 Missouri v.
Biden, 112 F.4th 531 (8th Cir. 2024) (granting injunction); Missouri v.
Trump, 128 F.4th 979 (8th Cir. 2025) (expanding injunction).
^
5 20 U.S.C. § 1087e(d)(7)(A).
^
6 20 U.S.C. § 1087e(a)(4)(A)(ii); 20 U.S.C. § 1087e(a)(4)(C)(ii) (defining “professional degree” from 34 C.F.R.
§ 668.2).
^
7 20 U.S.C. § 1087e(a)(4)(B)(ii).
^
8 Codified at 30 U.S.C. § 1087e(m).
^
9 34 C.F.R.
§ 685.219(a).
^
10 20 U.S.C. § 1087e(m); 34 C.F.R.
§ 685.219(b) (defining “full-time”).
^
11 34 C.F.R.
§ 685.219(b) (defining “qualified employer”).
^
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