Trump's major student-loan repayment overhaul enters its next phase

President Donald Trump’s sweeping student-loan changes are a key step closer to becoming reality.

The Department of Education announced on Thursday that it has published the proposed rule on student-loan repayment changes in the Federal Register, a key step the department must complete before implementing the final rule.

After Trump signed his “big beautiful” spending legislation into law, the department began negotiations with stakeholders on the proposed changes, which included new borrowing caps, the elimination of existing income-driven repayment plans, and a new repayment plan with less generous terms than those of existing plans.

Publishing the rule to the Federal Register is the next step in the negotiated rulemaking process, allowing the department to progress toward implementing the rule in July.

“With consensus reached in support of the Department’s proposed rule, we have a clear path forward to fulfill the President’s promise of making higher education more affordable and ensuring that every professional in America—from teachers and nurses to physicians and clergy—can pursue their careers without taking on debt they may never be able to repay,” Undersecretary of Education Nicholas Kent said in a statement.

Once the rule is formally published on Friday, the public will have until March 2 to comment on the proposed rule. The department said in its press release that it would consider the comments and “may make changes to the proposed regulations in response to substantive comments.”

One key change in the rule is the creation of a new Repayment Assistance Plan. It would set borrowers’ payments at 1% to 10% of their income, and any remaining balance would be forgiven after 30 years. It’s less generous than the SAVE planwhich the legislation eliminates. SAVE, created by former President Joe Biden, allowed for lower monthly payments and forgiveness after 10 years.

While the spending legislation would not eliminate SAVE before 2028, the department announced a proposed settlement which, if approved, would accelerate that timeline and require borrowers to switch to a new plan within a limited timeframe.

In addition to the new repayment plans, the proposed rule would place new borrowing caps on graduate and professional degrees while eliminating the Grad PLUS program, which allowed graduate students to borrow up to the full cost of attendance for their programs.

Changes for defaulted student-loan borrowers are also coming; the rule would allow borrowers in default to rehabilitate their loans twice, a process that would require them to work with their servicer on a payment plan that would eventually result in the default status being removed from their credit reports. Borrowers were previously allowed just one chance to rehabilitate.