Trump’s student loan policy changes take effect today, affecting 43 million borrowers who currently hold nearly $1.7 trillion in federal student debt. The overhaul, part of the administration’s Working Families Tax Cuts Act, replaces a complex array of repayment options with two streamlined plans and imposes new borrowing limits on parents and graduate students.
The most immediate change is the end of the SAVE plan (Saving on a Valuable Education), a Biden-era program that offered some of the most affordable monthly payments for struggling borrowers. More than 7 million borrowers enrolled in SAVE will have 90 days to switch to one of the two new repayment options: the Repayment Assistance Plan (RAP) or the Tiered Standard plan.
The Repayment Assistance Plan bases monthly payments on borrowers’ adjusted gross income, ranging from 1 to 10 percent depending on earnings, according to the U.S. Department of Education. The plan includes two key features: it waives unpaid monthly interest when borrowers make on-time payments, and it provides a matching principal payment of up to $50 per month if the borrower’s payment doesn’t reduce principal by at least that amount. Borrowers will need to make payments for 30 years before becoming eligible for loan cancellation.
The Tiered Standard plan offers fixed repayment terms of 10, 15, 20, or 25 years depending on loan balance, automatically providing lower monthly payments for borrowers with larger loan amounts. The Department of Education noted that under the old 10-year standard plan, a borrower with a $30,000 balance faced a $341 monthly payment, but under the tiered structure, that same borrower would pay $262 over 15 years.
New Borrowing Limits and Graduate Student Impact
Starting today, parents can borrow no more than $20,000 per dependent child annually, with a $65,000 lifetime cap per child, according to multiple university financial aid offices. This represents a significant restriction on parent PLUS loans, which previously had no annual limits. Graduate students will be capped at $20,500 per year with a $100,000 lifetime limit, while professional students (law, medicine) can borrow up to $50,000 annually with a $200,000 lifetime cap.
The federal government also eliminated the Graduate Direct PLUS loan program for new graduate and professional student borrowers, forcing them to seek alternative financing. Students currently enrolled in graduate or professional programs have a three-year exemption from the new limits.
The Trump administration framed the changes as simplification of a system that had become too complex. The Department of Education noted that borrowers previously faced more than 40 repayment and discharge options, with 70 percent reporting feeling overwhelmed when managing their loans.
Borrowers enrolling in automatic payments by September 30, 2026, will receive a 1 percent interest rate reduction, according to an Education Department announcement from June 18. This incentive comes as new student loan interest rates have climbed to some of their highest levels in years—6.52 percent for undergraduate loans and 8.07 percent for graduate loans, compared to 2.75 percent and 4.3 percent respectively five years ago.
Student advocacy groups have expressed concern that the changes will disproportionately affect lower-income borrowers. The National Consumer Law Center warned that while simplification is a worthy goal, “if it’s not affordable to families, then we’re going to see an increase in borrowers who go into default.” Some borrowers face significant payment increases; one North Carolina borrower told NBC News her monthly payment could jump from $150 to $713 under the new structure.
Sources
- NBC News — 43 million borrowers, $1.7 trillion in debt, SAVE plan enrollment figures, payment increase examples, and advocacy group commentary
- U.S. Department of Education — RAP plan details, interest waiver and matching principal payment provisions, Tiered Standard plan structure, and autopay interest rate reduction
- Harvard University Financial Aid Office — Parent PLUS loan caps of $20,000 per year with $65,000 lifetime limit, effective July 1, 2026
- University of Iowa Financial Aid Office — Parent PLUS loan changes and graduate student loan limits
- TCNJ Financial Aid Office — Graduate student borrowing limits and Parent PLUS caps
