Federal student financial aid faces a major overhaul tomorrow as the Biden-era SAVE repayment plan ends and new loan caps take effect under the One Big Beautiful Bill Act, forcing 7.5 million borrowers to choose new repayment options and reshaping how students can borrow for college.
Starting July 1, loan servicers will begin issuing notices to SAVE borrowers, giving them 90 days to select a new repayment plan or be automatically enrolled in one, according to the U.S. Department of Education. The SAVE plan, formally called Saving on a Valuable Education, became the target of legal challenges and was declared unlawful, leading to its phase-out.
Two new repayment plans will replace the existing income-driven options for new borrowers. The Repayment Assistance Plan (RAP) is income-based, charging 1% to 10% of adjusted gross income with forgiveness after 30 years, according to the Department of Education. The Tiered Standard Repayment Plan sets payments based on loan balance. For borrowers with existing loans taken before July 1, older income-driven plans like Income-Based Repayment remain available, but PAYE and ICR will be phased out by 2028.
Graduate students face significant new constraints. The Graduate PLUS loan program will be eliminated entirely for new borrowers starting July 1, according to multiple university financial aid offices. Graduate students will instead be limited to $20,500 in annual unsubsidized Direct Loans with a reduced aggregate limit of $100,000, a substantial reduction from prior uncapped borrowing.
Parent PLUS loans are also being capped. Starting July 1, new Parent PLUS borrowers will be limited to $20,000 per year with a $65,000 lifetime limit per dependent student, according to Harvard University’s financial aid office. Existing Parent PLUS borrowers who borrowed before July 1 can continue under current limits for three more years.
The changes stem from the One Big Beautiful Bill Act, enacted in July 2025 under the Trump administration. The law aims to simplify the student loan system but has raised concerns about affordability. Some SAVE borrowers have reported that monthly payments could increase substantially; one borrower told NBC News her payments would jump from $150 to $713 under a new plan, according to social media posts from news organizations covering the transition.
The overhaul represents one of the most significant restructurings of federal student aid in years. Unlike previous policy changes that phased in gradually, these modifications take effect immediately on July 1, leaving borrowers and institutions only days to prepare for the transition.
Sources
- U.S. Department of Education — announcement of SAVE plan end and transition process starting July 1, 2026
- Harvard University Financial Aid Office — Parent PLUS loan caps and legacy provisions
- University of Iowa Financial Aid Office — Graduate PLUS loan elimination and new graduate loan limits
- PHEAA — details on RAP plan structure and income-based payment percentages
- NPR — overview of July 1 student loan changes and new repayment plan options
- NBC News / Social Media Reports — borrower accounts of payment increases under new plans
