A new chapter in student loans: What the One Big Beautiful Bill Act means for physicians

Michael Foley, CFP, CSLP, CKA

After years of uncertainty, physicians with federal student loans finally have a clearer legislative road map. The One Big Beautiful Bill Act was signed into law last month, which, for physicians with student loans, brings new rules, new strategies and, in some cases, new urgency.

Hannah Flodin, CFP, CSLP

Below is what doctors need to know, what’s changing and how to best prepare to ensure they are on the most efficient repayment path moving forward.

End of the interest-free era: SAVE Plan subsidy ended August 2025

Let’s start with what’s coming to an end. The Department of Education announced that interest subsidies under the Saving on a Valuable Education (SAVE) Plan would officially expire on August 1, 2025. This means that even if your payment is $0 under SAVE due to low income, interest will start accruing again. As it stands now, there is no formal confirmation yet on when payments will resume.

What does this mean for you?

If your original plan was to pay off your loans, now is the time to begin making payments if you are able, in most situations. There are some fringe cases that might benefit from some of the interest subsidies coming on the Repayment Assistance Plan (RAP) plan (see more below) next summer, but those are few and far between.

If you’re aiming for forgiveness, especially Public Service Loan Forgiveness (PSLF), consider moving to the Income-Based Repayment (IBR) plan or Pay As You Earn (PAYE) plan if eligible to resume PSLF for qualifying months. For borrowers who don’t qualify for the newest version of IBR (loans after July 1, 2014), enrolling in the PAYE plan would result in a lower monthly payment until 2028.

Meet RAP: The new repayment assistance plan launching in 2026

On July 1, 2026, the Department of Education will officially launch a new income-driven repayment plan: the RAP. Below is how the new plan calculates your monthly payment:

How RAP works:

1. Determine your income tier: For example, if you earn $55,000, you’ll pay 5% of your adjusted gross income (AGI). Tip: Use the first digit of your reportable income, and that is your percentage. An income of $100,000 or higher maxes out at 10%.
2. Apply the percentage:Multiply your reportable income by this percentage.
3. Calculate monthly payment: Take that percentage of AGI, divide by 12, and subtract $50 per dependent.

Additional notes on payment:

They will typically pull your AGI from your most recently completed tax return. Remember, the goal is to report the most favorable income possible, and there are tax strategies that can help optimize how your income is reported (e.g., filing statuses, extensions, etc.). That said, the monthly payments can’t go below $10 per month like other plans.

Some of the key features of RAP include the following:

• No financial hardship requirement to enroll (anyone can enroll).
• The government covers all unpaid interest, preventing the balance from increasing, just like how the SAVE interest subsidies previously worked.
• Monthly payments are capped at the amount needed to repay your original loan over 10 years, based on when you first entered repayment.
• You can switch in and out of RAP as your situation changes, and you are not locked in.

IBR stays — but with a twist

The IBR plan will remain available, but the rules are changing:

The hardship requirement has been removed. This is especially great for high-earning attendings who were previously locked out of IBR and stuck on Income-Contingent Repayment (ICR). The 10-year cap based on your original loan balance still applies, which will allow for payments to stay somewhat reasonable.

However, any new federal loans taken out after July 1, 2026, will make you ineligible for IBR. If you want to keep IBR as an option, it’s important to avoid taking on new federal loans after that date.

Goodbye PAYE, SAVE and ICR: Sunsetting by July 2028

By July 1, 2028, the PAYE, SAVE and ICR plans will be completely phased out. All borrowers currently on these plans will be transitioned to RAP unless they choose another plan. Fortunately, these plans will continue counting toward PSLF and long-term forgiveness until they are retired. For physicians currently on SAVE or PAYE, now is the time to evaluate whether IBR is a better fit in the long term, but some may benefit from sitting tight until they are officially kicked off.

New standard repayment plan based on borrowing amount

Starting July 1, 2026, a new version of the Standard Repayment Plan will apply to all new borrowers. The extended repayment plan and graduated repayment plans will be gone. It will be based on the total amount borrowed:

• Less than $25,000 in loans: 10-year term
• Between $25,000 and $50,000 in loans: 15-year term
• Between $50,000 and $100,000 in loans: 20-year term
• Greater than $100,000 in loans: 25-year term

Note: This version of “Standard” differs from the cap used in IBR and RAP plans.

Limiting lifetime borrowing

To combat debt levels, the law also introduces lifetime borrowing caps:

• Total federal loan cap: $257,000
• Professional school (M.D., D.D.S., D.V.M., etc.): $50,000 per year, max up to $200,000
• Graduate school (nonprofessional): $20,000 per year, max up to $100,000

Current students are grandfathered if they graduate by mid-2029. While the intent is to encourage tuition control, there’s concern this may push future physicians toward private loans (subject to harsher underwriting and terms) or deter students from lower-income backgrounds from the profession entirely.

PSLF stays (mostly) intact

The most positive news coming from the new bill is that PSLF remains available with only minor changes:

• The new RAP plan qualifies.
• IBR continues to qualify.
• PAYE and ICR will count until their sunset date in 2028.

The PSLF Buyback Program is still active, but it isn’t written into law. Therefore, it remains vulnerable to legal challenges. Given it was created through Department of Education regulations, we wouldn’t recommend relying on it unless you are close to the finish line.

There will likely be further regulations coming down the pike that could further impact eligibility for certain borrowers and institutions, but the program remains unscathed for the time being.

Transitioning between plans: Know the triggers

One of the bill’s most borrower-friendly features is the ability to switch between repayment plans. However, borrowers need to be careful of the following prior to switching:

• If you borrow new federal loans after July 1, 2026, you’ll lose access to IBR.
• If you haven’t taken out new loans, you can still switch to IBR or RAP based on your situation.

Key dates to watch

August 1, 2025: SAVE plan interest subsidies end.

July 1, 2026: RAP officially launches. New loans are no longer eligible for IBR.

July 1, 2028: SAVE, PAYE and ICR plans sunset. Borrowers will be transitioned to RAP unless another plan is selected.

Final thoughts

This long-awaited legislation provides physicians with something we haven’t had in years: clarity. If you’ve been holding off on planning your repayment strategy or waiting for rules to settle, whether you are a resident, fellow or attending, now’s the time to act. If you’re unsure how these changes impact your situation, seek out a financial professional who is a Certified Student Loan Professional and understands the nuances of federal student loan policy. The right guidance now can save tens — or even hundreds — of thousands of dollars over the long haul.

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Cetera Wealth Services, LLC

Disclosure: Michael G. Foley CFP®, CSLP®, CKA®- 6720 N Scottsdale Rd Ste 290, Scottsdale, AZ 85253 Phone: 480-712-7285 The views depicted in this material are for information purposes only and are not necessarily those-of Cetera Wealth Services, LLC. They should not be considered specific advice or recommendations for any individual. This is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific, legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Neither Cetera Wealth Services, LLC nor any of its representatives may give legal or tax advice. The examples presented in this video are for illustrative purposes only and should not be deemed a representation of past or future results. Securities offered through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory services through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.

Cetera Wealth Services, LLC

Hannah Flodin CFP®, CSLP®, 6720 N Scottsdale Rd Ste 290, Scottsdale, AZ 85253 Phone: 480-550-9745 The views depicted in this material are for information purposes only and are not necessarily those-of Cetera Wealth Services, LLC. They should not be considered specific advice or recommendations for any individual. This is designed to provide accurate and authoritative information on the subjects covered. It is not, however, intended to provide specific, legal, tax, or other professional advice. For specific professional assistance, the services of an appropriate professional should be sought. Neither Cetera Wealth Services, LLC nor any of its representatives may give legal or tax advice. The examples presented in this video are for illustrative purposes only and should not be deemed a representation of past or future results. Securities offered through Cetera Wealth Services, LLC, member FINRA/SIPC. Advisory services through Cetera Investment Advisers LLC, a registered investment adviser. Cetera is under separate ownership from any other named entity.