The Student Loan Landscape is Changing This Summer — Here’s What HR Leaders Need to Know

This summer marks the official start of one of the biggest moments of transition the student loan landscape has ever seen. And if you have employees with student debt — or employees who are financing a college education — this moment will directly impact them.

On July 1, new legislation from the One Big Beautiful Bill Act (OBBB) goes into effect, reshaping federal student loan repayment from the ground up. At the same time, the SAVE plan is officially over, sending 7.5 million borrowers scrambling for answers at a moment when reliable guidance is harder to come by than ever. For HR leaders, understanding what’s happening — and being ready to support your workforce through it — has never been more important.

Here’s what you need to know.

What’s changing on July 1

A new income-driven repayment plan is launching

The Repayment Assistance Plan (RAP) is the newest federal income-driven repayment (IDR) option, available beginning July 1, 2026. Under RAP, payments are calculated at 1 to 10 percent of a borrower’s adjusted gross income, with any remaining balance forgiven after 30 years of qualifying payments. That forgiveness timeline is ten years longer than most existing IDR plans — and for many borrowers, particularly those at moderate-to-higher income levels, monthly payments under RAP will be meaningfully higher than what they’re used to.

Existing income-driven repayment plans are being phased out

Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) — two of the most widely used IDR plans — will close to new enrollment — two of the most widely used IDR plans — will close to new enrollment on July 1, 2027, and fully sunset on July 1, 2028. Borrowers currently on these plans will need to transition, and the clock on that decision is closer than it might seem.

Critical borrower safety nets are being eliminated

Starting July 1, 2027, unemployment and economic hardship deferments — longstanding protections for borrowers who fall on hard times — will be eliminated. New limits on forbearance will also take effect, leaving borrowers with fewer options if they struggle to make payments.

Federal borrowing limits are being overhauled

For employees who are currently financing a college education, the changes are equally significant. Graduate PLUS loans are being eliminated entirely. Parent PLUS loans will be capped at $20,000 per year and $65,000 total per student. New lifetime limits will apply to Graduate and Professional Stafford Loans. For families who have been relying on federal borrowing to bridge the gap between financial aid and tuition, this is a significant shift — and one that may require them to explore options they’ve never considered before.

The SAVE Plan is over — and 7.5 million borrowers need to act

On top of these sweeping changes, the SAVE (Saving on a Valuable Education) Plan has officially ended following a series of legal challenges. As a result, the 7.5 million borrowers currently in SAVE administrative forbearance — many of whom haven’t made a student loan payment in as long as two years — will receive servicer notices beginning July 1, 2026, giving them a 90-day window to choose a new repayment plan. Borrowers who don’t act by September 30 will be automatically placed on the Standard Repayment Plan, which for many will carry the highest monthly payment of any available option.

This is happening against the backdrop of a default crisis already in motion. Nearly 8 million borrowers were in default as of late 2025, with projections suggesting that number could reach 13 million by year-end. And the guidance borrowers are receiving from their loan servicers has been inconsistent at best — four out of five servicers were already failing accuracy standards before federal oversight was pulled entirely.

What this means for your employees

The impact of these changes will look different depending on where your employees are in their education financing journey:

• Parents and students borrowing for college are facing new federal borrowing limits that may leave a gap they didn’t plan for — with limited time to figure out how to cover it before the fall semester arrives.
• Employees in SAVE forbearance are reentering repayment for the first time in as long as two years, facing a 90-day window to make a consequential decision in a repayment landscape they may not recognize — with payments that could be hundreds of dollars higher than anything they’ve budgeted for.
• Employees on an IDR plan being phased out need to evaluate their options and make a plan, at a moment when the information available to them is incomplete, evolving, and in some cases just plain wrong.

For all of these employees, the stakes are high — and the support they’re getting from the system that’s supposed to help them is falling short.

How employers can help

Student loan stress is a workforce issue. Employees navigating payment shock, repayment confusion, or the threat of default are less financially stable, less focused, and more likely to be distracted at work. The good news: there has never been a better time for employers to step in.

The OBBB permanently extended the Section 127 tax exemption, which allows employers to contribute up to $5,250 annually toward employee student loans — tax-free for both employer and employee. Its permanent status gives employers the confidence to build and invest in these programs for the long term.

At Candidly, we’ve been preparing for this moment. Our platform is ready — and so is our team.

• Cait,™ our Conversational AI Tool, offers employees expert guidance whenever and wherever they need it
• Our Federal Repayment Plan Optimizer — already updated to include RAP — helps borrowers compare their options side by side and identify the right path forward
• Our Coaching team — all Certified Student Loan Professionals — is on the front lines of these conversations, ready to help employees make informed decisions before the deadlines arrive. In fact, Candidly users report feeling an average of 77 percent more confident about their student loans after speaking with a Coach.
• Our Student Loan Employer Contributions solution leverages the permanent extension of Section 127 to help employers to make up to $5,250 in annual tax-free contributions towards employees’ student loan repayment — giving employees a meaningful financial boost at exactly the right moment.
• Our Student Loan Retirement Match solution lets employers match student loan payments as tax-advantaged retirement contributions, so employees don’t have to choose between keeping up with loan payments and saving for retirement — a tradeoff that’s becoming even more common as financial pressure continues to mount.
• Our Learning Center features in-depth, expert-crafted resources covering the latest changes — from the end of SAVE to what RAP means in practice — so employees always have a trusted place to turn for answers

Want to learn more about how to support your employees through what’s ahead? Register for our upcoming webinar on June 9 — we’ll walk through exactly what’s changing, what it means for your workforce, and how to help your employees take action before the deadline.