Almost 8 million federal student loan borrowers who enrolled in a Biden-era repayment program will soon see interest accruing on their debt again, even as their payments are paused due to an ongoing legal battle.
Starting Aug. 1, interest will begin accruing on loans that are currently enrolled in the Saving on a Valuable Education, or SAVE, repayment plan, the Education Department announced Wednesday. Some 7.7 million borrowers are enrolled in the plan, which was created under the Biden administration in 2023 and faced immediate backlash from conservatives.
In fact, the future of the SAVE repayment plan has been in legal limbo for months, following a lawsuit brought by seven Republican-led states. While the lawsuit plays out, borrowers enrolled in the plan have not had to make payments, and interest has not accrued. Now, interest will restart, though enrolled borrowers still do not need to make payments, the Education Department says. That means their balance could grow as they wait for the lawsuit to play out—and when forbearance ends, borrowers will be need to make monthly payments on the new, higher loan totals.
The Student Borrower Protection Center, a student loan advocacy group, estimates this will cost the typical borrower $3,500 per year, or $300 per month, in interest payments.
The SAVE plan allowed some low-income borrowers to pay $0 per month on their loans. Debts could be forgiven after 25 years in repayment, even if that monthly payment never increased.
But the Trump administration is taking a significantly different approach to federal student loans than his predecessor. Blanket forgiveness—a cornerstone of the Biden approach—is off the table.
“Congress designed these programs to ensure that borrowers repay their loans, yet the Biden Administration tried to illegally force taxpayers to foot the bill instead,” said U.S. Education Secretary Linda McMahon.
The Education Department is encouraging SAVE borrowers to enroll in a different repayment plan. It says it will begin reaching out to affected borrowers.
In addition to restarting interest accrual, the Education Department resumed collections on overdue loans in May. It has received nearly $282 million in collections on defaulted federal student loans as of late June, according to a press release. It says it expects wage garnishment efforts to begin later this summer.
President Donald Trump’s campaign promises to end taxes on tips and overtime pay have seemingly come to fruition in the GOP’s “One Big Beautiful Bill” that became law Friday. But tax experts say there are a few nuances of the law workers should know ahead of next tax season.
Both provisions have the potential to be worth thousands of dollars, depending on the individual taxpayer’s situation and how much they earn. That fact is music to the ears of workers who are struggling to pay higher prices for just about everything.
But there is also the possibility they could cause tension among employees at the same company who could now be taxed differently, undermining tax fairness, says Marc Gerson, member at Miller & Chevalier and former majority tax counsel for the House Ways and Means Committee. Why should a server in a restaurant, for example, be exempt from paying taxes while a retail worker earning the same amount is not?
The provisions “arbitrarily reward some workers over others facing the same financial circumstances,” writes Abir Mandal, senior policy analyst at the right-leaning Tax Foundation. This, in turn, “disadvantages workers unable to access tipped or overtime-heavy roles, such as those with caregiving responsibilities or fixed schedules.”
Still, they have garnered widespread support among both Democrats and Republicans. Here’s what taxpayers need to know.
No tax on tips explained
For tipped workers, the legislation provides an above-the-line deduction for the first $25,000 in tips, meaning they can reduce their federal taxable income by that amount. Anything over that does not qualify, and this is not a total exclusion from paying taxes—where applicable, workers will still owe state, local, and payroll taxes that go toward Social Security and Medicare. That said, it could still be worth thousands of dollars a year in federal taxes that tipped workers no longer have to pay.
Exactly what service roles qualify under the legislation is still being hashed out. It is now up to the Treasury Department and IRS to write the regulations for businesses and individual taxpayers to follow, and to list the jobs that qualify for the deduction. The deduction does phase out for those who earn $150,000, and is available for tax years 2025 through 2028, when Trump leaves office. To qualify, the service worker—and their spouse, if they have one and file jointly—needs to list a Social Security number, meaning many immigrants and those married to them may not qualify.
“To be a ‘qualified tip’ for purposes of the deduction, the amount must meet certain requirements, including being paid voluntarily and determined by the payer,” says Jennifer Karpchuk, cochair of Holland & Knight’s state and local tax team. “Therefore, for instance, the deduction may not apply where a restaurant adds a mandated gratuity to the bill for parties over a certain size.”
Because many tipped workers are low-income, almost 40% already don’t pay federal taxes on their tips, says Meg Wheeler, certified public accountant and founder of the Equitable Money Project.
According to the Yale Budget Lab, around 4 million people—or around 2.5% of U.S. workers—are traditionally considered tipped workers. There is some worry among experts and economists that the policies could encourage some businesses and workers to change their pay structure to receive more in tips or overtime pay. Just when Americans are growing more and more fatigued at being asked to tip at seemingly every interaction, this change could supercharge the practice.
Businesses may also need to rework how they report tipped income on employee tax forms. Distinguishing between regular wages, tips, overtime, and bonuses adds additional work for employers to absorb, Mandal notes, as well as government revenue departments. At the same time, it could encourage employers not to raise base wages, he says, further shifting the burden of compensation away from the company.
“It is a win for the business owner,” Karla Dennis, a tax strategist, previously told Fortuneabout the policy. “They may have more of their employees wanting to work the jobs that earn tips, and it may also help to get more people in these service-oriented jobs.”
No tax on overtime explained
Those earning overtime pay can deduct up to $12,500 ($25,000 for married couples filing jointly), depending on income. Like the tipped income provision, this is available for tax years 2025 through 2028 and phases out for income above $150,000 ($300,000 for couples).
Many of the nuances of the tipped provision also apply here, including that both the taxpayer and their spouse need Social Security numbers to qualify, experts say. Additionally, overtime deductions only apply to overtime pay as defined by the Fair Labor Standards Act (FLSA) of 1938, says Karpchuk.
“It would not apply to overtime that is not required under the FLSA but is instead paid because of contractual provisions or because of more stringent state laws,” she says. For example, overtime promised under a collective bargaining agreement would fall under a contract, while California has a state law requiring daily overtime for hours worked in excess of eight in one day.
More information on exactly what jobs the provisions apply to will be made available in the months ahead.
When Maggie Hansen and a group of 11 of her friends made the trip to San Diego for her bachelorette party last year, she and her maid of honor tried to be as transparent as possible about the costs the 12 attendees would incur. Some could be anticipated, like airfare and a wine tasting excursion, but there were also unpredictable expenses like Ubers, bar tabs, and more.
While the financial costs of the getaway were inevitable, Hansen wanted to avoid adding emotional ones: In particular, the feelings of resentment, guilt, or disappointment that often arise with group trips. Since incomes and spending habits vary within a friend group, those feelings can multiply and fester. One friend may not drink alcohol or eat meat. That can easily cause problems if they are expected to split cocktail- and steak-heavy tabs with their friends who do. Another may make significantly less than others in the group but feel uncomfortable admitting to that fact.
Hansen’s dilemma will be familiar to plenty of 20- and 30-somethings who have attended increasingly expensive weekend trips with friends, destination weddings, or even concerts. Nearly 40% of Gen Z and millennials say they have a friend who drives them to overspend, according to data from Credit Karma, and while dining out and birthday celebrations often lead to profligate spending, weddings and bachelor and bachelorette parties are particular pain points. Some 56% of members of these generations feel they must attend these events even if it will put a financial strain on them, a separate Credit Karma survey finds. As a result, 38% say they have taken on debt.
Hansen, 31, took pains to avoid these outcomes. She began by asking for her friends’ preferences via Google survey before anything was booked, and planning around the budgets of friends who are educators as much as those who work in more lucrative careers like sales. The group also used apps like Splitwise and Tab to keep track of what everyone spent (with Splitwise, friends can split dinner tabs however they want, and tax and tip are automatically recalculated). That way, friends who weren’t partaking in drinks at dinner weren’t obligated to split the cost while not imbibing, and there was no awkward dance of who’s-paying-this-time, especially as some of the attendees were just meeting for the first time on the trip. It allowed each person to keep to their own budget.
For less well off friends, Hansen was able to use credit card points to help pay for their flights. Her maid of honor worked out payment plans with friends who wanted to attend but couldn’t front the total cost at one time. Hansen acknowledges she was lucky to be able to do this and that it wasn’t a financial strain on her maid of honor; it only works if everyone is honest about what they can take on.
“I tried to make it where it’s no pressure,” she says. “If you need assistance, this is my wedding, and I want you part of it. And I can opt into helping.”
The etiquette of shared-expense trips
Before big events or weekend trips, discussing spending expectations upfront is a must, says Thomas P. Farley, a keynote speaker and etiquette expert also known as Mister Manners.
“There should be no surprises financially,” Farley says. “While this may seem overly pragmatic, it can help avoid misunderstandings, hurt feelings and bruised credit cards after the fact.”
If you are asking people to come on the trip, consider if there are any expenses you can fully cover, like an exclusive dinner or excursion, and make it known from the jump that you will be paying for it. That could help cut the tension: According to the Credit Karma survey, 48% of millennials and Gen Z respondents believe the bride or groom should cover at least some of the costs of a bachelor or bachelorette trip, like travel and lodging; 32% think the bride or groom should cover all of their costs.
Also keep in mind that guests may need to take days off work to attend or miss out on other events in their life. Try to create a space where friends feel safe discussing their financial expectations; money can cause anxiety and other heightened emotions, and you want to be sure everyone is having a good time without worrying about the state of their bank account.
“Being open and honest about where you stand financially can help you and your friends better understand each other’s relationship with money,” says Jack Howard, head of money wellness at Ally Financial.
How to opt out
That said, the person planning the trip can only do so much. Farley says those with limited funds or different financial priorities need to “be brave enough to opt out.” Relatedly, skip parts of the itinerary that don’t fit into your budget as needed. Yes it might feel uncomfortable or awkward, but friends will understand your limitations.
“No friend should lose sleep over how they are going to climb out of the debt they incurred during a destination bachelorette party, ski weekend, or even an expensive dinner,” he says. “If it’s not within your budget, better to share that candidly.”
Jamila Musayeva, a certified etiquette coach from the International Etiquette and Protocol Academy of London, says to approach the conversation around collective comfort, rather than singling out any one person in the group. That helps open the door to honest dialogue.
“The most graceful way to approach it is with clarity and kindness,” says Musyeva. “You might say, ‘I’d love to join, and I want to make sure we’re all aligned on budget expectations before we book anything, should we set a spending range so everyone feels comfortable?'”
If someone proposes an expensive activity you can’t work into your budget, it’s okay to push back, but tone is everything in these situations, she says. You want to be warm, casual, and proactive.
“A polite yet firm way to respond would be, ‘That sounds amazing! It might be a bit outside my current budget, would anyone be open to a more low-key option?'” she says. “You can also offer alternatives to show you’re still enthusiastic about participating, just within your means.”
In fact, if you are the friend with the limited budget, then you should aim to be involved in the planning process, says Zina Kumok, financial advisor and personal finance expert. That way you can have some control over the cost.
“It’s not fair to have your friends plan everything and then for you to complain that you can’t afford it, you have to get involved,” Kumok says. “If you don’t have time to plan, then you need to give your friends your total budget and ask if they can stick to that.”
Check in with yourself
In situations where there are large discrepancies between who orders what at a restaurant, or when one friend is routinely stuck paying more than his or her fair share, Andrea Woroch, a personal finance and budgeting expert, says it’s acceptable to request separate checks. This can help “to avoid the awkward moment when you’re trying to itemize the bill,” Woroch says. Just inform your server at the outset of the meal.
Otherwise, have a discussion before your group goes out on how to split the bill. Regardless, ensure someone in the group either takes a photo of all of the receipts, or keeps the physical copies in one place.
Erika Rasure, chief financial wellness advisor at Beyond Finance, a financial services company, suggests setting aside 15 minutes after you receive the invite to review your budget and see how much you can feasibly (or want to) spend. If you are worried that you will blow your budget in the moment—which can be easy to do in the midst of a good time with friends—she suggests loading your budget onto a prepaid debit card before the trip.
“That way you can swipe without worrying about going over or touching your credit card,” Rasure says. “It’s a really simple tool that helps keep you on track.”
The Social Security Administration sent a misleading email to benefit recipients and other Americans last week about the Republican budget bill that was recently signed into law by President Donald Trump. Advocates are now trying to correct the record to ensure beneficiaries know how the legislation could affect their tax bill.
On July 3, Social Security sent an email and posted a press release saying that “the new law includes a provision that eliminates federal income taxes on Social Security benefits for most beneficiaries.” It also says “nearly 90%” of beneficiaries will no longer pay federal income taxes on the benefit. While eliminating taxes on Social Security had been proposed by Republican politicians, that provision was ultimately taken out of the version of the so-called “One Big Beautiful Bill” that became law because it violated Senate rules.
Instead, the law allows Americans aged 65 or older to take an additional $6,000 income tax deduction. Notably, this does not include beneficiaries who are aged 62 to 64. The agency updated the press release Monday to note the deduction after outcry and media coverage.
The difference could confuse beneficiaries, according to National Committee to Preserve Social Security and Medicare, a non-profit advocating to preserve and strengthen Social Security and Medicare. The group also notes that the political messaging behind the email—it heralds the “landmark” legislation—is “unprecedented” for the SSA, which is supposed to be a neutral agency managing the benefits of some 73 million Americans. SSA did not immediately respond to Fortune‘s request for comment.
Trump made a point of promising to end taxation on Social Security benefits on the campaign trail. As Republican politicians worked to put their budget bill together, many promised to include the provision.
But in order to pass the legislation using a process called reconciliation, it was determined that the GOP could not include a provision on Social Security taxes. Instead, they substituted in the higher deduction for older Americans.
The senior ‘bonus’ deduction
The legislation signed into law last week does, however, include a provision that allows Americans aged 65 and older to deduct an additional $6,000 on their federal income taxes, in addition to the standard deduction, which is already bigger for seniors than it is for younger Americans. Those who itemize also qualify for it. For married couples, both spouses can take the deduction if they are both over 65, for a total of $12,000 extra.
Like other provisions in the bill, it is time limited: It is in effect only for the 2025 to 2028 tax seasons. It also applies to those earning a modified adjusted gross income up to $75,000, or double that for married couples. It then begins to phase out for incomes above that threshold, and is not available to individuals earning $175,000, or couples earning $250,000.
According to the White House, this provision will increase the share of seniors receiving Social Security who will not pay income tax on their benefits from 64% to 88%.
The poorest seniors won’t benefit from the break, because they already do not pay Social Security taxes (the White House’s own analysis notes 64% already do not)—nor the richest, given the income phaseout. Instead, it is upper-middle class seniors who stand to benefit for the next few years. Those with incomes below $63,300 pay about 1% or less of their benefits, on average, in taxes, according to the non-partisan Center on Budget and Policy Priorities.
Additionally, this portion of the bill actually hastens the program’s insolvency, a concern for many Americans, because the taxes seniors pay on the benefits go back into the Social Security and Medicare trust funds for future generations. In fact, the Committee for a Responsible Federal Budget (CRFB) estimates the provision would bring the trust fund to insolvency one year sooner than current calculations. Once that happens, Social Security beneficiaries would face an across-the-board benefit cut of around 24%, CRFB says.
Other provisions in the bill are also expected to disproportionately affect older Americans. For example, it changes eligibility for and cuts federal funding for the Supplemental Nutrition Assistance Program (SNAP) starting in 2027, which 11 million adults aged 50 and older rely on, according to AARP. New work requirements on Medicaid could also prevent some older Americans from receiving benefits.
Social Security has become a lightening rod for controversy since Trump’s inauguration in January. The agency was an early target of the administration’s so-called Department of Government Efficiency under Elon Musk, which has worried advocates who say it is becoming overly-politicized.
Stocks fell to session lows Monday as President Donald Trump once again ratcheted up the trade tensions that sent indices tumbling when he first announced widespread tariff plans in April.
The slide started after Trump posted letters on his social media platform, Truth Social, that he says he sent to Japanese and Korean officials threatening them with 25% tariffs on goods being imported to the U.S. beginning Aug. 1. The countries can still reach a deal with his administration before then that could avoid those rates.
Later in the afternoon, the president posted additional letters he says he sent to Laos and Myanmar, which will face 40% tariffs starting on Aug. 1., and Kazakhstan and Malaysia, which will also see 25% duties. South Africa faces 30% tariffs. Trump also signed an executive order extending a 90-day “pause” on his tariffs to Aug. 1. It was originally set to expire Wednesday, July 9.
The announcement of the extension on the tariff pause was not enough to alleviate investors. Immediately following the president’s posts, shares of Alphabet, Apple, Honda, Nvidia, and Toyota all fell. The Nasdaq was down 0.95% in the afternoon, while the S&P 500 fell 0.89% and the Dow Jones Industrial Average shed 1.1%. The losses follow several indices hitting record highs last week.
An earlier threat from Trump also had investors worrying about tariffs.
“Any Country aligning themselves with the Anti-American policies of BRICS, will be charged an ADDITIONAL 10% Tariff. There will be no exceptions to this policy,” Trump wrote in a different post Sunday night, referring to the intergovernmental organization between countries including Brazil, China, Egypt, India, Saudi Arabia, and Russia, among others.
Monday’s tariff rates are the first of many other trade announcements the president is expected to make this week, according to White House press secretary Karoline Leavitt and Treasury Secretary Scott Bessent, who told CNBC Monday that “it’s going to be a busy couple of days.”
Only about 54% of imports from Japan and 46% of imports from South Korea would be exposed to the 25% tariffs, according to Capital Economics. That’s because the new rate would not apply to goods that fall under the president’s already-implemented product-specific tariffs, such as autos, as well as exemptions for electronics and pharmaceuticals.
“It’s telling that Trump has not (yet) released a letter threatening higher tariffs on the European Union, suggesting that he remains satisfied with how those bilateral trade talks are going,” writes By Paul Ashworth, Capital Economics’ chief North America economist. “From the European side, media reports suggest a draft framework deal is close to being agreed, which would allow time for more detailed negotiations.”
Meanwhile, Tesla was down over 7% for the day, following CEO Elon Musk’s pronouncement that he planned to form a new political party after the passage of the Republican budget bill he opposed.
President Donald Trump signed the so-called One Big Beautiful Bill (OBBB) into law Friday, resulting in a budget that will have far-reaching repercussions, affecting millions of Americans’ bank accounts, for better and worse.
The legislation is extensive, including hundreds of provisions that touch everything from individual rates to student loans to the estate tax. It attempts to pay for the included tax breaks by slashing spending on social safety net programs like Medicaid and nutritional benefits, as well as green energy programs. Even with these cuts, it is expected to add $3.1 trillion to $3.5 trillion to the national debt over the next 10 years.
Along with provisions directly affecting Americans’ personal finances, it earmarks hundreds of billions of dollars for the president’s deportation efforts. It also creates a dual-class tax structure: one for citizens and their families, and another for those with at least one immigrant member, regardless of whether they are documented or not.
Various analyses of the bill’s provisions find it will benefit wealthy Americans far more than lower-income earners. In fact, after-tax-transfer income for the lowest-earning 20% of Americans drops by an estimated $245 next year, increasing to a loss of $1,385 annually by 2033, according to the Penn Wharton Budget Model (PWBM). Future generations are also “uniformly worse off,” according to PWBM.
“All future generations experience one-time welfare losses, ranging from -$22,000 for the lowest income quintile to -$5,700 for the highest,” the analysis reads. “A middle-income child born today would see a $9,800 loss.”
The Yale Budget Lab finds similar outcomes: It estimates changes to taxes, Medicaid, and SNAP would lead to a $700 decrease in income for the lowest 20% of earners, while the top 1% would see a $30,000 increase. Republicans say it will have positive effects throughout the economy.
“There’s a view that there’s a lot of potential economic growth from the bill that will have a positive impact on the economy,” says Marc Gerson, member at Miller & Chevalier and former majority tax counsel for the House Ways and Means Committee.
The legislation, which totals almost 1,000 pages, is far-reaching, and the details of how many provisions will be implemented still need to be worked out. For example, while it calls for no federal taxes on some tips and overtime, the IRS still needs to write those regulations for businesses and individual taxpayers to follow. That said, exactly how it will affect people is unknown at this time.
Additionally, many of the individual tax cut provisions are temporary, lasting generally through 2028 (this differs by provision, though, and will be noted if the information is available).
Here’s what financial advisors and experts say Americans need to know about the OBBB now.
Income tax cuts
The bill makes permanent certain provisions from the 2017 Tax Cuts and Jobs Act (TCJA), including lower individual tax rates compared with what was in place before then: 10%, 12%, 22%, 24%, 32%, 35%, 37%. That said, these rates have been in place since the 2018 tax year, so many taxpayers are already accustomed to them.
It also eliminates personal and dependent exemptions, and some itemized deductions while keeping the doubled standard deduction (compared to pre-TCJA). Under the bill, the standard deduction for 2025 is $15,750 for single taxpayers, $31,500 for joint filers, and $23,625 for heads of household.
“If you don’t qualify for new tax benefits, your tax outcome may look similar to last year’s since many provisions under the TCJA are being made permanent,” notes TurboTax.
Estate tax exemption
For the super wealthy, the bill makes permanent the doubling of the estate tax exemption from the TCJA. For decedents dying in 2026 and beyond, up to $15 million (and $30 million for couples) is exempt from the federal estate tax, and this exemption will be indexed for inflation.
This mostly benefits individuals with estates in excess of $7.5 million, the old exemption amount, says Jane Ditelberg, director of tax planning at Northern Trust Wealth Management.
“Locking in the $15 million exemption indefinitely brings certainty to families planning major wealth transfers,” says Ditelberg. “For more than two decades, taxpayers have faced a moving target, with the applicable rules changing depending on the year of death. This takes that risk off the table.”
Child tax credit
Under the bill, the child tax credit is increased from $2,000 per child to $2,200, and is subject to annual inflation increases. The bill requires the taxpayer claiming the credit, the taxpayer’s spouse, and the child to have Social Security numbers.
Senior tax deduction
In place of eliminating taxes on Social Security, Americans 65 or older will see a temporary “bonus” deduction of up to $6,000 on their income taxes. This will be available to single filers making a modified adjusted gross income up to $75,000, or couples making up to $150,000, for tax years 2025 to 2028.
Car interest deduction
Car buyers will be able to deduct up to $10,000 of interest per year on new auto loans. This is limited by income: It phases out for single filers with incomes above $100,000 (and $200,000 for married couples). It also only applies to cars assembled in the United States. This is available for those who itemize and those who do not.
Tips and overtime tax deductions
The bill provides above-the-line deductions for some tip income and overtime pay for certain workers, fulfilling one of Trump’s campaign promises.
That said, there are important restrictions to keep in mind about both. Those with tip income can deduct up to $25,000 for qualified tips from their federal tax bill, phasing out for those with income above $150,000. This is in place for tax years 2025 through 2028.
“It’s essential to understand that this deduction doesn’t directly reduce your taxes dollar-for-dollar, and your actual tax savings will depend on your tax rate,” notes TurboTax.
Those earning overtime pay can deduct up to $12,500 ($25,000 for married couples filing jointly), depending on income. Like the tipped income provision, this is available for tax years 2025 through 2028 and phases out for income above $150,000.
Because many tipped workers are low-income, almost 40% already don’t pay federal taxes on their tips, says Meg Wheeler, certified public accountant and founder of the Equitable Money Project. Additionally, tipped workers should know they will still technically owe state and employment taxes like Social Security and Medicare on their tips; it remains reportable income. This is not a total exclusion from paying taxes.
“We know that lots of tipped workers don’t necessarily report all of their tips. So just even right there, that will be an interesting shift,” says Wheeler. “I also am curious about whether or not this pushes more employers or even more employees to want to move to a tipped model, because they think this is helpful.”
Gerson says these provisions—which the IRS will need to write guidance on before they are implemented—may create additional discrepancies on how workers are taxed in the same workplace. That can lead to headaches for business owners, as well as create tension among employees who are compensated differently.
“If you take a restaurant, you have some people who are tipped and will benefit from the exclusion, and then you have people that aren’t tipped and won’t benefit from it,” he says. “It just has an impact on workforce dynamics. Some people [may] no longer want to be salaried because they can get in overtime.”
Student loans
The bill makes a number of changes to the federal student loan program starting in 2026, many of which will make payments higher for borrowers.
The bill reduces the number of income-based repayment plans, phasing out the Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Saving on a Valuable Education (SAVE) plans starting in July 2026. Current borrowers will have two years to switch to a version of the Income-Based Repayment (IBR) plan, the standard repayment plan, or the Repayment Assistance Plan (RAP), a new offering. New borrowers, meanwhile, will only be able to enroll in the RAP.
“Many existing borrowers will see higher monthly payments under these new plans, though the current iteration of the bill at least allows more time to change plans,” says Kate Wood, loans expert and writer at NerdWallet. “As of now, student loan forgiveness still appears to be on the table, though RAP requires up to 30 years of repayment first, a longer repayment timeline than any current plan.”
One of the big differences, says Wheeler, is that RAP has a minimum monthly payment. This is different from some of the current income-based repayment plans, which allow some borrowers to pay very low amounts or nothing at all, depending on their earnings.
“Now, all of a sudden, they have to jump up to this minimum just because that’s the rule, that’s the law,” says Wheeler. “I think that’s going to be, right off the bat, a huge issue.”
It also lowers the limits on graduate school loans, eliminates the federal Grad PLUS program altogether, and caps Parent PLUS borrowing. These changes apply to new loans starting July 1, 2026.
While the high cost of graduate school has been a target of people who want to reform the student loan system in the U.S., experts say limiting how many federal loans borrowers can take out won’t solve much. Instead, it means they will have to rely on private loans—which have fewer protections for borrowers and potentially higher interest rates—or skip higher education altogether. Those attending professional school for law or medicine may have the most to lose.
SALT cap
One of the more contentious aspects of passing the bill was what to do with the cap on state and local tax deductions, or the SALT cap. Trump’s 2017 tax bill put a cap of $10,000 on it; that cap has been increased to $40,000.
This is one of the most expensive provisions in the bill. Taxpayers in California, Illinois, New Jersey, and New York stand to benefit the most: They account for 40 of the 50 top congressional districts affected by the cap. The cap reverts to $10,000 in 2030.
“It’s increased relief, but it is temporary,” says Gerson. “And so it’s something that Congress will have to revisit.”
‘Trump accounts’
The bill establishes so-called Trump accounts, which are a new type of tax-favored account for newborns. Children born between 2025 and 2028 will receive $1,000.
Medicaid cuts
The bill makes dramatic cuts to Medicaid, the health care program for low-income, disabled, and some senior Americans. It will also affect those who have Affordable Care Act (ACA) health care coverage.
People on Medicaid will face strict new work requirements for able-bodied adults, and eligibility checks will increase from every 12 months to every six months. Estimates put the number of those losing health coverage at around 16 million Americans.
“It’s very likely that people will lose coverage even if they still qualify, just due to the administrative burden,” says Kate Ashford, investing specialist at NerdWallet. “It’s also likely that some hospitals in rural areas that rely on Medicaid funding will reduce services or close, meaning that people in those communities may have to travel far or go without care if they get sick or injured.”
Americans with ACA health insurance coverage will have to reverify eligibility for tax credits each year, an additional hurdle to renewing. It also does not extend the ACA subsidies that help many Americans afford their coverage.
“If those expire, ACA health insurance costs will go up substantially, placing real stress on people’s budgets and potentially resulting in people dropping health insurance,” says Ashford. “Many immigrants who are legally residing in the U.S. will also lose access to ACA subsidies, forcing many of them to end coverage and raising rates for people who remain on plans.”
Allowing the subsidies to expire will also raise costs substantially for small-business owners who rely on ACA coverage, says Ashford, as will the Medicaid cuts. She says small-business owners and other entrepreneurs may find that health insurance coverage is now too expensive to enter the field.
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