The passage of The Reconciliation Bill (One Big Beautiful Bill Act) on July 4, 2025, has brought changes to the standard that the U.S. Department of Education uses to decide if a borrower has defenses against repayment of a loan taken out for a closed school or one that engages in fraud. 

Previously, an amendment to the Code of Federal Regulations in November 2022 made the standard to have a defense against a repayment for a federal loan more broad. However, the implementation of this standard will now be delayed to go into effect for loans taken out on or after July 1, 2035. 

This change will make it more difficult to have a defense against a repayment if a school closed, or used fraudulent or predatory methods to recruit a student. 

The new regulations also add that a borrower who takes out a loan on or after July 1, 2027, cannot defer that loan due to unemployment or economic hardship. Similarly, borrowers who take out a loan on or after July 1, 2027, are only eligible for a forbearance of no longer than nine months within a two-year period. These new provisions give individuals in financial distress less tools to avoid defaulting on their loans. 

However, on or after July 1, 2027, borrowers who have defaulted on a Federal Family Education Loan (FFEL), Direct Loan, and Perkins Loan can now rehabilitate their loan twice. The process of rehabilitation is meant to help borrowers get out of default. Rehabilitation can look different depending on the type of loan. For FFEL and Direct Loans, this means making nine reasonable monthly payments within 20 days of the due date for 10 consecutive months, or a full monthly payment within 20 days of the due date for nine consecutive months for a Perkins Loan.

These new regulations will make it harder overall for individuals to get forgiveness or deferment of a student loan. These changes, coupled with the increased period before forgiveness on the new Repayment Assistance Plan (RAP), necessitates that borrowers carefully weigh their options with their financial situation before taking out a student loan.