Major changes to federal student financial aid took effect on July 1, 2026, following the One Big Beautiful Bill Act signed into law on July 4, 2025. The overhaul introduces new borrowing limits, eliminates popular repayment options, and restricts how much students and parents can borrow for college.
The most significant change affects lifetime borrowing: all federal student loan borrowers now face a $257,500 lifetime borrowing limit across all loan types, according to the U.S. Department of Education. This cap applies to the total of subsidized loans, unsubsidized loans, and graduate or professional PLUS loans combined, and does not reset even if borrowers pay off or receive a discharge on portions of their debt.
Parent PLUS loans face new annual and lifetime restrictions. Starting July 1, parents can borrow a maximum of $20,000 per year for each dependent undergraduate student, with a $65,000 lifetime limit per child, according to the National Association of Independent Colleges and Universities (NAICU). This represents a sharp reduction from the previous system, which allowed parents to borrow up to the full cost of attendance minus other aid received.
Elimination of Graduate PLUS and Repayment Restructuring
Graduate PLUS loans, which allowed graduate and professional students to borrow without annual limits, are now eliminated for new borrowers starting July 1, 2026. Graduate students entering new programs on or after that date will only have access to Direct Unsubsidized Loans with reduced aggregate limits, according to the Pennsylvania Higher Education Assistance Agency (PHEAA). Students who began borrowing before July 1, 2026, can continue accessing Graduate PLUS loans through a limited transition period.
New borrowers face a dramatically simplified repayment landscape. The federal government has created two new repayment plans for loans first disbursed on or after July 1, 2026: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan. The RAP is an income-driven option that bases monthly payments on 1 to 10 percent of adjusted gross income over up to 30 years, according to the Federal Student Aid office. The Tiered Standard Plan uses a fixed tiered structure based on loan amount.
Most existing income-driven repayment plans—including the Saving on a Valuable Education (SAVE) plan, Pay As You Earn (PAYE), and Income-Based Repayment (IBR)—are being phased out for new loans. Borrowers who took out loans before July 1, 2026, can retain access to these plans, but once they borrow new money after that date, they must switch to RAP or the Tiered Standard Plan. The SAVE plan, which was introduced in 2023 and had attracted millions of borrowers seeking lower payments, is no longer available to new borrowers as of July 1.
The changes also affect undergraduate borrowing. New undergraduate borrowers still face the same annual limits as before—up to $5,500 to $7,500 per year depending on year in school—but the new $257,500 lifetime cap applies to them. If they pursue graduate study later, that undergraduate borrowing counts toward their lifetime maximum.
When similar federal student loan restrictions have been implemented in the past, they’ve prompted borrowers to accelerate applications before deadlines. Ahead of July 1, 2026, the Federal Student Aid office noted it anticipated a large volume of consolidation applications from borrowers trying to lock in access to older repayment plans before the deadline.
Sources
- Federal Student Aid (studentaid.gov) — Official government updates on One Big Beautiful Bill Act changes, including loan limits, repayment plans, and eligibility rules effective July 1, 2026
- Washington State University Financial Services — Details on $257,500 lifetime borrowing limit and implementation timeline
- National Association of Independent Colleges and Universities (NAICU) — Parent PLUS loan caps of $20,000 annually and $65,000 lifetime per child
- Pennsylvania Higher Education Assistance Agency (PHEAA) — Information on Graduate PLUS elimination and new repayment plan structures (RAP and Tiered Standard)
- Citizens Bank — Overview of income-driven repayment plan phase-out including SAVE, PAYE, and IBR for new borrowers
- Harvard University Financial Services — Confirmation of repayment plan changes and elimination of current IDR plans for new loans
