Starting July 1, federal student loan borrowers will face major changes to repayment plans and borrowing limits under the One Big Beautiful Bill Act, affecting millions of Americans with federal student loans.
The most immediate change affects the 7 million borrowers enrolled in the SAVE repayment plan, which will be eliminated. Loan servicers will begin issuing notices around July 1 giving these borrowers roughly 90 days to switch to a new repayment plan, according to the U.S. Department of Education.
New borrowers taking out loans after July 1 will face a dramatically narrower set of options. Instead of the multiple income-driven plans currently available, they’ll be limited to just two: the new Tiered Standard Plan and the Repayment Assistance Plan (RAP). The Tiered Standard Plan extends repayment over 10 to 25 years depending on total loan balance, while RAP bases monthly payments on adjusted gross income and includes forgiveness after 30 years.
Graduate students will see the most significant borrowing restrictions. As of July 1, they can borrow a maximum of $20,500 per year with a lifetime cap of $100,000—a sharp drop from the previous system that allowed borrowing up to the cost of their program. Professional degree students in fields like law, medicine, dentistry, and pharmacy face a $50,000 annual limit with a $200,000 lifetime cap. The Graduate PLUS loan program, which previously allowed unlimited borrowing for graduate students, is being eliminated entirely.
Parent PLUS loans are also being capped for the first time. Parents can now borrow a maximum of $20,000 per year per dependent child, with a $65,000 lifetime limit per dependent. Additionally, new Parent PLUS borrowers will only qualify for the Tiered Standard Plan and will lose access to income-driven repayment options and Public Service Loan Forgiveness.
The changes stem from the One Big Beautiful Bill Act, which represents a significant overhaul of federal student aid policy. The legislation also sets a new lifetime borrowing cap of $257,500 across all federal Direct student loans (excluding Parent PLUS loans) for all levels of study combined.
Financial aid experts have warned that pushing millions of SAVE borrowers into costlier repayment plans could worsen an alarming rise in student loan defaults, particularly for low-income borrowers who enrolled in SAVE specifically because it offered $0 monthly payments. Borrowers who don’t act by the 90-day deadline will be automatically enrolled in one of the least flexible repayment plans available.
Borrowers with loans issued before July 1, 2026, who don’t plan to take out additional loans will retain access to existing income-driven repayment plans including Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), and Pay As You Earn (PAYE), though ICR and PAYE are being phased out by 2028.
Sources
- NPR — Comprehensive guide to July 1 student loan changes, repayment plan options, and borrowing limits by category of borrower
- U.S. Department of Education — Official announcements on SAVE plan elimination and next steps for borrowers, plus finalized rules on loan limits
- PHEAA — Details on new repayment plans (RAP and Tiered Standard) effective July 1, 2026
- UC Law San Francisco — Specific borrowing limits for graduate and professional students under new rules
- Urban Institute — Analysis of impact of new federal loan limits on borrowers
