Student loan repayment is undergoing a sweeping overhaul on July 1, 2026, as the Biden-era SAVE plan officially ends and two new federal repayment options launch under the One Big Beautiful Bill Act. More than 7 million borrowers currently enrolled in the Saving on a Valuable Education (SAVE) plan must choose a new repayment plan within 90 days or face automatic enrollment in a less flexible option.
A federal court ended the SAVE plan on March 10, 2026, ruling it unlawful. The U.S. Department of Education began notifying borrowers in March that they would need to exit SAVE and enroll in a legal federal student loan repayment plan, according to a department press release.
Starting July 1, federal loan servicers will issue notices to SAVE borrowers instructing them to exit the plan and enroll in a new repayment option within roughly 90 days. Those who don’t act will be automatically enrolled into either the Standard Repayment Plan or the new Tiered Standard Plan, according to NPR’s education coverage.
The new Repayment Assistance Plan (RAP) is the primary alternative for income-driven borrowers. Under RAP, monthly payments are based on adjusted gross income and the number of dependents, according to the Education Department. Unlike SAVE, which was known for extremely low payments including $0 monthly options for low-income borrowers, RAP charges 1% to 10% of adjusted gross income, according to PHEAA’s guidance on the changes.
The Tiered Standard Plan offers fixed repayment terms of 10, 15, 20, or 25 years based on total loan balance. Borrowers owing less than $25,000 repay over 10 years, while those owing $100,000 or more have 25 years, according to NPR’s comprehensive guide to the changes.
The changes extend beyond repayment plans. Parent PLUS loans will be capped at $20,000 per year per dependent child with an aggregate cap of $65,000 per dependent, a dramatic shift from prior rules that allowed borrowing up to the cost of attendance. Graduate students will face new limits of $20,500 per year with a lifetime cap of $100,000 in Direct Unsubsidized Loans, except for certain professional degrees like medicine and law that qualify for higher limits, according to NPR.
Financial aid experts have warned that the transition could increase student loan defaults. NPR reported that many borrowers enrolled in SAVE specifically because their low incomes qualified them for $0 monthly payments, and shifting them to plans with higher costs could exacerbate an already alarming rise in student loan defaults.
Borrowers with loans issued before July 1, 2026, who don’t take out new loans can stay on existing income-driven plans like Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), or Pay As You Earn (PAYE). However, ICR and PAYE will be phased out by July 1, 2028, forcing those borrowers to switch again, according to NPR.
The overhaul is part of broader federal student loan reforms included in the One Big Beautiful Bill Act, signed into law in July 2025. The legislation also establishes a $257,500 lifetime borrowing limit on all combined federal student loans, according to Washington State University’s financial aid office.
The Department of Education is providing resources to help borrowers select plans. The agency recommends using its Loan Simulator tool to compare repayment options and determine which plan results in the lowest total payments over time.
Sources
- NPR — Comprehensive guide to July 1, 2026 student loan changes, including details on SAVE plan ending, new repayment plans, and loan limits for various borrower types
- U.S. Department of Education — Official press release announcing next steps for borrowers enrolled in the SAVE plan and guidance on transitioning to new repayment plans
- PHEAA — Detailed breakdown of how the One Big Beautiful Bill Act affects student loan repayment options and new plan features
- Washington State University Financial Aid Office — Information on lifetime borrowing limits established by the One Big Beautiful Bill Act
