Major Student Loan Changes from the One Big Beautiful Bill Act
The recently enacted One Big Beautiful Bill Act (OBBBA) brings significant changes to student loan repayment options for optometrists - both current ODs and future borrowers.
Here’s a breakdown of what you need to know - as of my current understanding. I'm sure we'll keep learning more as everything is implemented (or challenged 🤷♂️).
I'll cover:
- Changes for Current (Graduated) Optometrists
- Department of Ed Starting Interest Accrual for SAVE Forbearance
- Changes for Future Optometrists
Please note, this does not apply to Parent PLUS borrowers. Also, PSLF is still available - that hasn't changed.
And be sure to check this week's podcast episode, diving into both the tax and student loan aspects of the
What’s Changing for Current (Graduated) Optometrists?
Starting July 1, 2026, ICR, PAYE and SAVE will be eliminated - however there is a gradual transition for current borrowers.
You'll have until July 1st, 2028, to make the transition to the new repayment options - assuming you don't take additional federal loans or consolidate after July 1st, 2026.
Eventually, if you'd like to use an income-driven repayment option, you'll choose between two main paths:
1. Modified Income-Based Repayment (IBR):
Fortunately, the final Bill keeps both the new and the old versions of IBR.
Old IBR: 15% of discretionary income and 25-year forgiveness (if you borrowed before July 1, 2014).
New IBR: 10% of discretionary income and 20-year forgiveness (if your first federal loan was after July 1, 2014). This is essentially a twin of PAYE.
IBR appears to have been modified to remove the requirement of a "partial financial hardship". Meaning, if your income is high enough to create an IBR payment as high as the 10-year standard plan you can still enter the IBR plan.
Previously, if your income was that high, you weren't able to get onto the plan (but it also capped your IBR payment at that standard payment amount).
2. The New Repayment Assistance Plan (RAP):
Payment Calculation: Payments based on 1-10% of your Adjusted Gross Income (AGI) - depending on how high your AGI is.
Once your AGI hits $100,000 and beyond, you'll use 10% of your AGI - that's likely where you'll end up based on typical OD pay.
Family Size Impact: Note that this is different from how current IDR plans are calculated. Current plans - including the ongoing IBR plan - use a percentage of "discretionary income".
Meaning, they start with your income (by default AGI), then subtract a poverty line amount for your family size. Lastly, they multiply that result (called discretionary income) by either 15% or 10%.
Current IDR plans shield a portion of your income for your family size. While RAP does provide a $50/mo deduction from your payment for each child claimed on your tax return, you'll likely see a noticeable difference at larger family sizes.
Forgiveness: Private-sector forgiveness is available after 30 years (longer than current IDR options). PSLF remains 10 years.
Spouse's Income: Like the IBR plan, RAP allows married filing separately strategy to exclude spouse’s income.
Interest Subsidy: Like SAVE, unpaid interest is waived. If your monthly RAP payment doesn't cover your accruing interest, that interest would be waived and not added to your loan balance.
Changing Plans: Here's the kicker - once enrolled, switching our of RAP plan to IBR isn't allowed. It's a one-way ticket, it doesn't appear you'd be able to move off of it.
Of course, there will be a Standard Repayment option, with a repayment timeline up to 25 years, depending on the loan balance.
Gradual Transition Up to July 1st, 2028
Current borrowers can remain on their existing repayment plans until July 1, 2028, giving you time to carefully evaluate your options.
To summarize my current understanding of your options:
Example - Comparing New IBR, Old IBR, and RAP
To get a feel for the differences in payments between IBR and RAP, imagine you're a single parent with two kids, and an AGI of $185,000.
Initial Observations for Current Optometrists
Here are some initial thoughts from the Bill so far, at least as far as I understand it at the moment.
All 20-year forgiveness routes have been removed - unless you're a new borrower as of 7/1/2014 and won't take any more federal loans after 7/1/2026.
If that's you, you easily made out the best from this whole ordeal. You're able to benefit from the New IBR plan with a 20-year forgiveness timeline and a 10% calculation.
Otherwise, forgiveness becomes more expensive. It's time to look at the math once again, and decide whether it's favorable enough to keep aiming for forgiveness.
And whether it's worth political uncertainty - which is always the tradeoff when you're using IDR plans for a projected better math outcome.
Generally, I think the math will likely still make sense to where:
- If your federal loan-to-income ratio is 2x or more - including planning strategies like filing taxes separately - then forgiveness may make sense mathematically.
- If your federal loan-to-income ratio is less than 2x or more - it's a big "it depends" area. It may not be as much of a slam dunk as before, and you'd have to compare the math vs. your cash flow priorities.
If you're on PAYE, you have some time to make a decision. No need to make a rushed choice right now.
Department of Ed Suddenly Decides to Start Interest Accrual on the SAVE Forbearance
Well, this was a surprise. This week, the Department of Ed announced that they will start interest accrual for those on the SAVE forbearance August 1st.
This is separate from the Bill that passed. Up to this point, the SAVE forbearance has been interest free as we've all waited for the court cases to resolve.
Starting August 1st - while the forbearance continues - interest will start accruing again, adding to your total owed amount.
This likely pushes up the timeline to make a decision and switch plans for many of you.
If you're sticking with an IDR plan, you're considering PAYE, New IBR, or (unfortunately) Old IBR - then going with the timelines above.
If you're planning to pay down your loans and have been enjoying the interest-free forbearance, unfortunately the party's over.
What about Future Optometrists?
Future ODs yet to graduate that will take federal loans after July 1st, 2026, the road ahead looks very different for you. There's still a lot to think through here.
Repayment Options
If you take any loans after July 1st, 2026, your only options will be
- The RAP plan, or
- Standard Repayment plan up to 25 years, depending on your loan balance
Federal Loan Limits
In addition, starting July 1st, 2026, the Grad PLUS loan program will no longer be available, which allowed loans up to the cost of attendance.
There will be the following max loan limits:
- For Professional Grad Programs like optometry - Federal borrowing limits of $50,000/year; $200,000 aggregate.
- Lifetime borrowing cap on all federal loans: A $257,500 borrowing cap on all federal student loans for student borrowers.
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There is a provision grandfathering you into the old borrowing limits if you already started your program before 7/1/2026. From my understanding, it looks like you have the lesser of:
- 3 years, or
- the normal remaining time of your program
This shift may mean an increased reliance on private loans. I'm also wondering how this impacts the pricing of optometry and undergraduate school, as PLUS loan programs have no doubt allowed price creep in higher education costs.
It'll also lead to interesting decisions for those almost done with their program - if you had one more year left, would you take that last year/semester as private loans rather than federal, so you can preserve the New IBR repayment option?
Hard to say, other than there's a lot to think through for future borrowers that I'm not quite ready to tackle just yet.
Key Positive Updates
It's not all negative - there were a few positive aspects of the Bill:
- Death and disability loan discharges remain permanently tax-free.
- Employer contributions toward student loans ($5,250 annually) continue on, now adjusted for inflation.
Wrapping Up
There's a lot changing right now, as we're all working to understand what's going on from a tax and student loan perspective.
Please reach out if you have any questions, or click here to schedule a time to chat.
Keep in mind, there are always ways to plan around changes like this. Take a deep breath, look at the options available, and make informed decisions.
I'll work to keep you up to date as things come up. Have a great evening!
Evon Mendrin CFP®, CSLP®
New From our Education Hub
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Podcast Ep. 143: How the Final One Big Beautiful Bill Act Impacts Optometrists
I dive deep into the new Bill, talking through what we know about the tax and student loan changes impacting Optometry.
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