Big Student Loan Changes Are Final: What Optometrists Need to Decide Now

The Department of Education just released its final rule implementing the federal student loan changes we’ve been tracking over the past couple of years — and while most of it lines up with what we expected, two surprises stood out. 

In this episode, we recap how we got here (the official end of the SAVE Plan and the sweeping changes from the One Big Beautiful Bill Act), break down the income-driven options ODs have going forward, and dig into the two surprises in the final rule that could affect your repayment strategy.

If you have questions about navigating these decisions alongside the rest of your cash flow, tax, and practice planning, reach out at podcast@optometrywealth.com.

What You’ll Learn

•Why the SAVE Plan is officially dead and the 90-day decision window for borrowers still in SAVE forbearance
•How the One Big Beautiful Bill Act splits borrowers into two groups based on the July 1st date
•Why consolidating your federal loans right now could restrict your repayment options
•The difference between old and new IBR — and which ODs qualify for each
•How the new Repayment Assistance Plan (RAP) works, including its payment calculation and 30-year timeline
•The first surprise: new restrictions on who can enter Pay As You Earn before it sunsets in 2028
•The second surprise: how RAP payments are (and aren’t) treated for forgiveness under IBR

Key Takeaway

July 1st is the date to circle. Whether you’re deciding how to exit SAVE forbearance, weighing a consolidation, or trying to lock in Pay As You Earn before new restrictions hit, the window to act on your best options is closing — and the right move depends heavily on your specific path toward forgiveness or payoff.

Resources

• Podcast Ep. 152: Listener Q&A: Practice Ownership, Backdoor Roths, and Student Loans
• Podcast Ep. 151: How Filing Taxes Separately Impacts Student Loan Outcomes for Optometrists
• Ep 143: How the Final One Big Beautiful Bill Act Impacts Optometrists – Taxes, Student Loans, and More!

Want a more proactive approach to your planning?

You can schedule a no-commitment introductory call to discuss what's on your mind financially and learn how we help optometrists navigate those same decisions nationwide.

👉 Schedule an introductory call

The Optometry Money Podcast is dedicated to helping optometrists make better decisions around their money, careers, and practices. The show is hosted by Evon Mendrin, CFP®, CSLP®, owner of Optometry Wealth Advisors, a financial planning firm just for optometrists nationwide. 

Transcript

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Evon 0:04

Hey, everybody. Welcome back to the Optometry Money Podcast. We're helping ODs all over the country make better and better decisions around their money, their careers, and their practices. I am your host, Evon Mendrin, Certified Financial Planner practitioner, and owner of Optometry Wealth Advisors, an independent financial planning firm just for optometrists nationwide. And thank you so much for listening. Today's episode, we are gonna dive into important student loan changes as the Department of Education just released at the beginning of this month a new final rule implementing all of the recent changes that we've been talking about over the months, with two important surprises, and it's those two surprises I wanna highlight in this episode. But, before I dive into those, I just wanna walk through again how we got here, right? What has happened over the last couple of years? And if you've been paying attention to the student loan landscape or just listening to the podcast, reading our content here, there have been two separate things that have been impacting student loans separately. Number one was this SAVE Plan court case or court cases that have been ongoing. And essentially, what had happened was the legality of the SAVE Plan was challenged in courts. And then after a couple years and several appeals later, we finally had a ruling earlier this year that essentially and effectively kills the SAVE Plan. Now, we had a feeling this was coming. This was kind of our expected outcome, but it is now official. The SAVE Plan is dead. It's not coming back. Uh, ladies and gentlemen, dear optometrists, it's time to move on. and that SAVE forbearance, if you've been on that SAVE forbearance over the years, like that's not been earning you credit towards forgiveness. Interest was accruing again, so there really is no reason to continue on anyways, but now you're going to have to make a decision. So essentially what happened as a result of that court case is, number one, the entire rule that allowed for the SAVE plan, which includes a bunch of provisions around other things related to federal student loans, that entire rule was vacated. it's done away with. and starting July 1st of this year, there's going to be a 90-day window for anyone who's still on the SAVE plan forbearance to make a decision to go to somewhere else. Now, you can hop onto IBR, Pay As You Earn potentially still available, but it's time to make a decision to go somewhere else. And if you don't do anything by the end of that 90-day window, the Department of Education says that you're gonna be r- enrolled into a standard type repayment plan. between now and 90 days after July 1st of this year, i- it's time to make a decision, and y- you're probably gonna wanna make a decision sooner rather than later, but that's what's happened as a result of that court case. Now, this also impacts something called PSLF buyback. PSLF buyback was something w- that allowed you to buy back all of these months in SAVE forbearance for purposes of public service loan forgiveness once you hit that point where you would've hit 120 payments, including those months of forbearance. But, as a result of these rulings, you're not gonna be able to use the SAVE plan as a way to calculate the cost of those months. You're gonna have to use a different plan, Pay As You Earn, for example, if you hopped onto Pay As You Earn, after that forbearance. so the court cases were the first thing. The second big thing that happened was that in 2025, the One Big Beautiful Bill Act was signed into law, and, that law made big sweeping changes to the federal student loan landscape, especially for income-driven repayment, and it's essentially split borrowers into two groups. It's those of you who are, on the one hand, currently graduated and practicing optometrists, versus current or future students. more specifically, it's those of you who won't be taking any federal loans on or after July 1st of this year or consolidating your loans, versus anyone that will take federal loans on or after July 1st of this year, or will consolidate your federal loans. There's two separate rules happening for each of those groups. So for those of you that are currently graduated optometrists, you're currently practicing, and you won't be taking any federal loans on or after July 1st, or consolidating your loans, which is really important, consolidation is a factor here. the income-driven options moving forward for you are gonna be consolidating into two, either the IBR plan, which is one of the ones that currently exists, or the newly created RAP, the Repayment Assistance Plan with the other plans like Pay As You Earn phasing out, so it's gonna be consolidating your options there. And anyone that takes any federal loans on or after July 1st of this year, or consolidates your federal loans and that consolidation is finished and processed on or after July 1st, the only options you're gonna have available to you are the RAP plan or their new tiered standard repayment plan. So it's really important, for those of you who are considering consolidating your federal student loans for whatever reason, I would be highly hesitant to do that moving forward, because it's just gonna restrict your options, of the repayment plans that you have. Now, it's important to remember IBR has two different versions. There's an old version with a 25-year timeline to forgiveness and a less favorable, repayment calculation, and a new version which is a 20-year timeline to forgiveness and a more favorable payment calculation. It's essentially a twin of Pay As You Earn, and which one you're gonna qualify for depends on when you took out your very first federal loans. If you took out your very first federal loans before July 1st of 2014, you're only eligible for old IBR. If you took your very first federal loans July 1st of 2014, then you have the best option available, which is the new version of IBR. The ones to me that have been impacted the most, or disadvantaged the most for current optometrists as a result of the law were those of you that were eligible for Pay As You Earn, but not eligible for new IBR. So for those of you that borrowed between 2007 and fall, and before fall of 2014. because on the one hand you had Pay As You Earn, which is a 20-year timeline of forgiveness and a more favorable payment calculation, and that's sort of been pulled out from under you here. the rug has been pulled out from under you a little bit here. Now your only option moving forward is gonna be that 25-year timeline under old IBR. maybe that changes again with a future Congress, future administration, but, unfortunately, i- it's those of you who have been disadvantaged the most. Now, the second one that's gonna be available is that RAP. that's expected to be available on July 1st of this year, and this plan is different. It- it's very different from how we've seen income-driven plans work in the past, and it's a 30-year timeline to forgiveness, which is a essentially a career-long tax. that being said, it is eligible for PSLF, so you still can qualify for that 10-year PSLF so if you are PSLF eligible, that's, this is still gonna be an option for you here, and it has a totally different payment calculation from what we've seen before. this one is gonna take your adjusted gross income, your AGI, which is line 11 on your federal tax return, and it's going to multiply that by a percentage, and it's either gonna be, anywhere from 1% all the way to 10%, depending on how high your income is. Once you get to an AGI of $100,000 or beyond, it's gonna be a 10% calculation. And if you have kids, your payment's gonna be reduced by $50 per month per dependent child, and there is no cap on payments here. With IBR, there is a cap on payment, and they're gonna cap that based on the, based on the standard repayment amount when you enter that repayment plan. That's gonna be the cap. Your payments won't go higher than that. With RAP, there is no cap. It will go as high as your income will take it. there are some benefits though. you can file separately and exclude spouse's income, so that's something that's available here, and unpaid interest is waived That means if your payments are low enough to where it doesn't cover all of the interest in the year, you don't have accumulated interest piling up, that unpaid interest is waived, which can be helpful if you are potentially gonna be a p- eligible for PSLF, but you're really not sure where your career's gonna head, and maybe the other direction that you would take is going to the private sector and otherwise paying off your loans in full. that interest subsidy can be really helpful in those specific situations. So RAP plan, again, a really long timeline of forgiveness, with those additional details there. so that's what's gonna be available for those of you who have graduated, you are practicing, and you don't take additional loans on or after July 1st, and do not consolidate your federal loans on or after July 1st. Now, what's important to know is that although that consolidation of your options are happening, you can still use Pay As You Earn because that plan is sunsetting, and it's going to be phasing out sometime between now and July 1st of 2028. So if you are on Pay As You Earn and you are not eligible for the new IBR, you can continue to use Pay As You Earn at least up until July 1st of 2028. Now, you do have to make a decision to hop onto another plan by July 1st of 2028, because if you don't, you're very likely gonna be auto-enrolled into RAP from that point moving forward. So you do need to remember to make a decision but that being said, there is a sunsetting of Pay As You Earn up until that point and so that July 1st deadline, that July 1st date is a really important date. Please keep that in mind, and please be very careful about consolidating your federal loans, especially at this point. it's becoming less and less likely that it's going to get processed and dispersed by that July 1st timeline. So keep that in mind there. Now, on May 1st, the Department of Education released the official final rule which implements all of the changes from the One Big Beautiful Bill Act and fills in the gaps from that SAVE Plan final rule going away. this rule is going to be in effect July 1st of 2026 of this year, and much of it is what we expected just from the law itself as it was passed, with two surprises, and it's those two surprises that I wanna dive into today. the first surprise is who will be eligible for Pay As You Earn between now and July 1st of 2028. Now, remember Pay As You Earn is phasing out between now and July 1st of 2028, and to be eligible for Pay As You Earn originally, you would have had to be a new borrower as of October 1st, 2007, meaning you didn't take your very first federal loans before then, and you would have had to taken federal loans after October 1st of 2011. so you couldn't have had any federal loans, before October of 2007, and you had to take at least one federal loan on or after October 1st of 2011. and there's a group of you that, are either borrowers that are currently in the SAVE forbearance or are in the old IBR that are eligible for Pay As You Earn. if you are deciding you want to use income different plans towards forgiveness, and that's what makes the most sense for your situation, you might want to use Pay As You Earn and its more favorable payment calculation as long as you can, at least through this 2028 window. now the new rule added additional restrictions of who can enter the Pay As You Earn plan. and two of the ones are really surprising to me. so not only did you have to be eligible for it, as we originally talked about, but when the rule is in place, You also would've had to be on Pay As You Earn as of July 1st of 2024, and you couldn't have left Pay As You Earn on or after that date for another plan. So essentially, if you were not on Pay As You Earn as of July 1st of 2024, and if you left Pay As You Earn, so for example, for the SAVE plan after that point, you would not be eligible to get back onto Pay As You Earn, which is a surprising and kind of silly roadblock to me. If you're eligible for it, you should be eligible for it. so this is something to keep in mind. If you are one of those borrowers that are currently on the SAVE forbearance or are in old IBR, and you're eligible for p- for Pay As You Earn otherwise, and you want to use income-driven plans towards forgiveness, these additional barriers are something you wanna keep in mind. Now, it's important to say that this rule doesn't go into effect until July 1st of this year. So technically, what you may want to do is try to hop onto Pay As You Earn before then so that you're not gonna be restricted by those additional barriers. now I should also say that I don't know if your application for Pay As You Earn's gonna be finished by that point. I'm imagining as all of this is happening, there's gonna be a lot of delays happening with things getting processed, so just keep that in mind. But, that may be something, if that's you, and Pay As You Earn would make sense for you already, you may wanna try to get onto that sooner rather than later. Now, there are other factors to keep in mind, what your income would be if you hop on Pay As You Earn, because that's gonna trigger a need to re- recertify your income. You're gonna have to relook at your income again. there's other things to keep in mind, but you should know about these additional roadblocks moving forward. the second thing that surprised me is the way that payments under RAP are gonna be handled. specifically, we know that IBR payments or past income-driven payments should be eligible for, for forgiveness under RAP, meaning those past payments under IBR or Pay As You Earn, they should qualify towards that 30-year timeline towards forgiveness under RAP if you switch to that plan. But what surprised me is that RAP payments will not be eligible for forgiveness under IBR. So if you were trying to use RAP temporarily, it appears that you can switch off of that plan onto IBR, but those payments under RAP won't qualify for a 20 or 25-year forgiveness under IBR. Keep that in mind. it's not going to count towards taxable forgiveness under IBR. It will still be eligible for Public Service Loan Forgiveness. It's still gonna have that interest subsidy if you plan on paying off your loans in full, but it's not gonna help you towards a 20 or 25-year timeline for taxable forgiveness under IBR. So those are two things I wanted to highlight. If you have questions on any of this, I know there's a lot of changes happening. If you have questions, reach out to me. Student loans, in my work for optometrists, we work at that intersection of practice and personal finances, and a really important part of that, which has a really important impact on cash flow, are student loan payments. And helping optometrists navigate student loan decisions is a really important part of what we do, both for practice owners and associate doctors. So if you need help navigating these decisions alongside all of your other cash flow and investment and tax planning or f- or practice financials decision-making, reach out to me. Would love to help you make the right decisions for you. And hopefully this is the last student loan episode we have to do for a while, uh, which would mean that things are settling down a little bit for ODs on this front. there are a few different directions I'd like to go from here. I wanna do an episode on, IPOs, initial public offerings. there are a lot of questions out there on some of the online optometry groups I see asking about, should you invest in these IPOs? Can you invest in these IPOs from companies like SpaceX I wanna talk about what, research and history shows us about how well IPOs perform. Hint, it's not great shortly after the IPO. but also talk about how IPOs are handled from the perspective of things like index funds a- and other similar funds. So, I wanna do an episode on that, and then I wanna do a series on the four to five really key questions that practice owners need to solve as you plan for the sale of your practice down the road. So look out for those, to be coming out over the next few weeks. if you have any questions, again, reach out to me at, uh, podcast@optometrywealth.com. Really appreciate your time and your attention today. We'll catch you on the next episode. In the meantime, take care.