Tony w Lucy

Photo by Dr. Audra Fenimore

Dr. Tony Bartels, shown with his daughter, Lucy, is a student debt educator for the Veterinary Information Network and its nonprofit counterpart, the VIN Foundation.

We now have a more definitive blueprint on what comes next for veterinary student borrowers and those repaying their student loans.

Last Friday, the president signed into law a bill that significantly impacts federal student loan borrowing and repayment. While the new law brings a major shift from previous higher education policy, thankfully, the passed version isn't as radical as initial proposals.

The student loan system is still a mess, however, and it will be changing significantly over the next several years. Luckily, the changes do not take effect immediately. The final legislation provides more detail than earlier versions did on the transition to a new repayment and borrowing landscape.

For those in repayment, fewer options starting in July 2028

As professionals who typically incur a high level of educational debt relative to their income, many veterinarians manage their federal loans using repayment plans keyed to their income. Up to now, there have been a number of so-called income-driven repayment plans available. That no longer will be the case.

Three plans are being phased out: Income-Contingent Repayment (ICR), Pay As You Earn (PAYE) and Saving on a Valuable Education (SAVE). By July 1, 2028, borrowers who are using any of these plans will need to shift out or be shifted out. They will not be grandfathered.

These borrowers will have a choice of two other income-driven plans: an amended version of a previously established plan called Income-Based Repayment (IBR) or a new plan called Repayment Assistance Program (RAP).

The law explicitly authorizes loan forgiveness or cancellation with either plan after the borrower makes payments for a specified period. The law also counts payments made under previous income-driven repayment toward the time required to reach forgiveness under IBR and RAP. All forgiven or canceled debt generally is treated as taxable income by the IRS (unless a special exemption is made, as was previously done for student loans forgiven during 2021-25)

Also available to this group of borrowers are a Standard Repayment Plan and a Graduated Repayment Plan.

The law did not change Public Service Loan Forgiveness (PSLF). That program remains available as before.

Amended Income-Based Repayment

To understand the changes to IBR, it helps to review how it works. IBR became available in 2009. It has a maximum repayment period of 25 years for graduate and professional school borrowers such as veterinarians. Its minimum monthly payment is 15% of the borrower's discretionary income, and the monthly payment is no more than what the borrower would pay on a 10-year fixed payment schedule.

An updated version of IBR came out in 2014, available to borrowers who received their first federal student loan after July 1 of that year. IBR 2014 has a maximum repayment period of 20 years and a minimum monthly payment of 10% of discretionary income, with a similar payment cap.

Before the law amended IBR, a borrower needed to pass a "partial financial hardship" test to access either plan. The test compared their calculated IBR payment with a 10-year fixed payment. If the IBR payment was lower, the borrower passed the test. Otherwise, they were not allowed to use IBR. Borrowers accepted into IBR who later did not pass the test because their income rose had a monthly payment capped at the fixed 10-year level.

With the new law, Congress eliminated the partial financial hardship test and retained the 10-year fixed payment cap on the amount due each month. This amendment will give those using IBR a maximum payment set at the 10-year plan payment amount that was calculated when they first applied for IBR. This is hugely helpful for borrowers close to reaching forgiveness because many could not otherwise pass the hardship test later in their careers, having loan balances smaller than their annual incomes. They would have been unable to get in IBR and would be able to work toward forgiveness only by using RAP, which does not have a monthly payment cap.

Borrowers who receive a federal student loan after July 1, 2026, will not be able to use IBR. This is a major blow to those entering school or still in school and using federal student loans after that date. Their only options will be RAP or a standard plan.

Repayment Assistance Program to debut in 2026

Available starting July 1, 2026, RAP has a 30-year repayment maximum before any remaining balance is canceled. That is five or 10 years longer than required in the income-driven plans that preceded it. Payments made under prior forgiveness-eligible plans will be counted toward the 30 years.

The payment under RAP varies from a minimum of $10 a month to between 1% and 10% of the borrower's Adjusted gross income (AGI). The maximum of 10% of AGI applies to borrowers with an AGI greater than $100,000. For borrowers without a recently filed tax return or an AGI that is not a reasonable measure of their current income, alternative documentation, such as a recent paystub, can be used. (This is also available to borrowers using IBR.)

RAP subtracts $50 from the borrower's monthly payment for each dependent claimed on their tax return. This is different from the IBR calculation, which uses a family-size definition and U.S. Department of Health and Human Services poverty guidelines to provide an additional allowance for households in which the borrower provides at least 50% financial support for its members.

Both IBR and RAP allow married borrowers to exclude their spouse's income from the monthly payment determination if they have filed their recent tax return separately. However, filing taxes separately for RAP will now be more complicated with the new dependent credit.

The most beneficial aspect of RAP is a 100% unpaid interest subsidy. Similar to the SAVE plan that is no longer available, all interest not covered by the minimum payment is "deferred" and not added to the borrower's balance.

RAP also goes a step further than SAVE by reducing the principal by up to $50 during each month that the monthly payment is lower than the monthly interest accrual.

The trade-off for the unpaid interest subsidy and principal reduction is the longer (30-year) period to reach forgiveness. The longer a borrower is in repayment, the more costly the loan.

Borrowers may leave RAP for another repayment plan at any time, although it's not clear yet whether they can switch to IBR.

RAP payments are eligible toward PSLF.

Other repayment changes

Any loan included in a Direct Consolidation Loan after July 1, 2026, will be eligible for RAP and standard plans only.

For any loan received after July 1, 2027, forbearance cannot exceed nine months during any 24-month period, down from 12 months, with a maximum of 36 months over the life of the loan. A minimum payment of $10 will be required during periods of forbearance for loans received after July 1, 2027. Currently, no payment is owed during forbearance.

Congress also authorized an automatic income recertification option for income-driven repayment plans, by which the government automatically will use the AGI from a recently filed tax return to update the borrower's income-based payment when their recertification is due. Borrowers may opt in or out of the automatic recertification. Those opting in should have an opportunity to confirm use of their AGI or provide alternative documentation before their recertification is due.

Changes affecting new borrowers

Three major changes are on the way: borrowing limits for all students, including professional school students; limits on Parent PLUS loans; and the end of Direct PLUS loans, better known as grad PLUS loans. 

Most current veterinary students rely on grad PLUS loans to cover costs beyond the current Direct Unsubsidized Loan limits for veterinary school (up to $47,167 for U.S. schools and $20,500 for accredited programs outside of the U.S.). But starting July 1, 2026, grad PLUS loans will not be available. 

In lieu of grad PLUS, the Direct Unsubsidized Loan limits will be increased to $50,000 per year, with an aggregate limit of $200,000. There is also a new lifetime aggregate limit of $257,000 on all loans made to students who start their borrowing after July 1, 2026.

It is unclear how the new limits will impact future students eligible for U.S. student loans attending accredited foreign programs.

For current veterinary students (including those starting school this year), the previous federal student loan limits remain in place for up to three academic years after June 30, 2026.

Some veterinarians, in addition to repaying their own federal student loans, use Parent PLUS loans to help their children pay for college. Previously unlimited, Parent PLUS will now have an annual cap of $20,000 and an aggregate cap of $65,000 per dependent student. These caps are separate from the other borrower-specific annual and lifetime caps in the new law. Parent PLUS changes take effect July 1, 2026.

For anyone with Parent PLUS loans in repayment, there is a rare opportunity under the new law to make the loans eligible for IBR. Parent PLUS loans repeatedly have been excluded from income-driven repayment eligibility — other than in ICR for those who consolidated their Parent PLUS loans into a Direct Consolidation Loan. Once consolidated, Parent PLUS loans could be eligible for forgiveness or PSLF. With ICR being eliminated, any Parent PLUS borrower who has those loans consolidated before July 1, 2026, can switch to IBR to repay those loans and keep them forgiveness-eligible.

Any Parent PLUS loan received after July 1, 2026, can be repaid using only a standard plan, with no forgiveness option.

Use the transition phase wisely

All borrowers should use the transition period to review their loan details, repayment plan, minimum monthly payment, and current repayment plan eligibility. Look for notices from your loan servicer(s) and the U.S. Department of Education about any deadlines you must meet. Get to know the coming changes to student loan repayment options and think about how they will impact your repayment strategy. When you have questions, ask. This is going to continue to be a confusing area for a while to come. We'll all be working hard to learn more together.

For aspiring veterinary students, financing education and repaying loans will be more challenging. It's always easier to manage a lower student loan balance than a higher one. The "Apply Smarter" concept has never been more important. Focus on keeping education costs lower by applying to programs where you can receive discounted tuition, such as by being a resident of the state where the school is located or a state that has a contract for discounted seats at the school. Those who can pay for their education using only or mostly federal student loans will have an easier time in repayment than those with mixed federal and private student loan balances.

Dr. Tony Bartels is a student debt educator at the Veterinary Information Network, an online community for the profession, and its affiliated nonprofit, the VIN Foundation. A graduate of the Colorado State University combined MBA/DVM program, Tony and his wife, Audra, a small animal internal medicine specialist, together have more than $400,000 in veterinary school debt that they manage using federal income-driven repayment plans. When he's not staring holes into his veterinary colleagues' student loan data, Tony enjoys fly fishing and exploring Colorado with Audra, their daughter Lucy and their two rescued canines, Addi and Maggie.