Major changes to federal student loan rules took effect earlier today, July 1, 2026, reshaping how millions of Americans borrow and repay education debt under the One Big Beautiful Bill Act signed into law last year. The overhaul imposes stricter borrowing limits on students and families while narrowing repayment options for new borrowers—the most significant restructuring of the federal student loan system in decades.
The changes affect nearly every aspect of student lending. Most immediately, more than 7 million borrowers currently enrolled in the SAVE repayment plan will be forced to transition to new options, with loan servicers notifying them today that they have 90 days to select a new plan. Those who do nothing within that window will be automatically placed in the standard repayment plan, according to CBS News.
New borrowers taking out loans on or after July 1 face a dramatically simplified but less generous system. They will have access to only two repayment plans: the Tiered Standard Plan, a fixed-payment option lasting 10 to 25 years, and the new Repayment Assistance Plan (RAP), an income-driven plan where monthly payments range from 1% to 10% of adjusted gross income, with forgiveness after 30 years. By contrast, current borrowers who do not take out new loans can continue using existing repayment options such as Income-Based Repayment, Pay As You Earn, and Income-Contingent Repayment—though some of those plans will sunset by July 2028.
Borrowing limits have tightened sharply across multiple categories. Parent PLUS loans, which historically allowed parents to borrow the full cost of attendance, are now capped at $20,000 per year and $65,000 total per student. Graduate students can borrow no more than $20,500 per year, with a lifetime cap of $100,000 for their degree. Professional degree students—in fields such as medicine, law, dentistry, and pharmacy—are limited to $50,000 per year and $200,000 total. Additionally, the Graduate PLUS loan program, which previously allowed graduate students to borrow unlimited amounts, is being phased out for new borrowers, though existing borrowers retain access.
A new lifetime aggregate loan limit of $257,500 applies to all borrowers receiving loans on or after July 1, affecting undergraduate and graduate borrowing combined. The legislation also expands Pell Grant eligibility to students in short-term workforce training programs in fields such as nursing assistance, early childhood education, and automotive mechanics, beginning today.
Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, told CBS News that “these are the most changes we have seen at this scale in a very long time.” The U.S. Department of Education described the overhaul as a way to streamline a system currently consisting of seven repayment plans and to rein in student loan debt, which stands at almost $1.9 trillion.
The transition has raised concerns among borrower advocates. Michele Zampini, associate vice president of federal policy and advocacy at the Institute for College Access & Success, told The Guardian that “people are not feeling good” about the changes. A September 2025 survey from her organization and Data for Progress found that nearly half of borrowers reported long wait times to speak to or receive responses from loan servicers, and Zampini warned that “even people who have been actively trying to move out of SAVE have been hitting a lot of roadblocks.” She added that borrowers who made enrollment decisions based on the old system “are going to leave school into a less generous, more expensive repayment system.”
The changes stem from the One Big Beautiful Bill Act, which President Trump signed into law on July 4, 2025. A March 2026 federal court ruling that the SAVE plan was unconstitutional accelerated the timeline, prompting the Department of Education to announce the plan’s termination. Financial experts and student borrower advocates have expressed major concerns about the shifts, particularly regarding payment affordability and the ability to navigate the transition without servicing errors.
Borrowers are advised to contact their loan servicers and consult online repayment calculators to determine which new plan best suits their circumstances. Winston Berkman-Breen, legal director of the advocacy group Protect Borrowers, urged borrowers to ensure their contact information is current and that they have access to their studentaid.gov account, noting that “if you have not been paying attention to your loans for four, five, six years, totally understandable. But now is the time” to take action.
Sources
- CBS News — detailed overview of new borrowing limits, repayment plan options, Pell Grant changes, and expert commentary from Sarah Austin and Winston Berkman-Breen
- The Guardian — reporting on the SAVE plan ending, 7 million borrowers affected, 90-day transition window, new repayment plans, and expert commentary from Michele Zampini
- Federal Student Aid (studentaid.gov) — official government announcement of One Big Beautiful Bill Act updates and effective date
- Harvard University Financial Aid Office — details on Graduate PLUS loan elimination and aggregate lifetime loan limits
- U.S. Department of Education — official press release on new repayment plans, interest rate reduction announcement, and Workforce Pell Grant program
