Millions of Student Loan Borrowers Face New Repayment Rules, Tighter Limits Starting July 1
Sweeping changes to federal student loan repayment take effect July 1 under the One Big Beautiful Bill Act, eliminating several existing plan options and introducing two new plans that will eventually replace all others. Millions of borrowers — including those enrolled in the now-defunct SAVE plan, parent PLUS borrowers and graduate students — must review their repayment status immediately or risk automatic reassignment to a default plan.
Key takeaways
- Sweeping federal student loan repayment changes take effect July 1 under the One Big Beautiful Bill Act, eliminating several plans and introducing two new ones that will eventually replace all others.
- SAVE plan borrowers receive notices to enroll in a different plan within 90 days or be automatically placed in the standard repayment plan.
- New Parent PLUS loans issued on or after July 1 must use the Tiered Standard Plan with no income-driven option, and borrowing is capped at $20,000 per year and $65,000 total per dependent student.
- Graduate students face new unsubsidized loan caps of $20,500 annually and $100,000 lifetime, while professional students in fields like pharmacy, dentistry and law face caps of $50,000 annually and $200,000 total.
- The two new plans are the Tiered Standard Plan, with fixed payments over 10 to 25 years, and the Repayment Assistance Plan, with income-based payments and a $10 monthly floor for low- or no-income borrowers.
Sweeping changes to federal student loan repayment take effect July 1 under the One Big Beautiful Bill Act, eliminating several existing plan options and introducing two new plans that will eventually replace all others. Millions of borrowers — including those enrolled in the now-defunct SAVE plan, parent PLUS borrowers and graduate students — must review their repayment status immediately or risk automatic reassignment to a default plan.
SAVE Plan Wound Down, Two New Plans Take Its Place
Borrowers currently in the SAVE plan will receive notices directing them to enroll in a different repayment plan within 90 days. Borrowers who do not act will be automatically placed in the standard repayment plan. The Income-Contingent Repayment and Pay As You Earn plans remain available to some existing borrowers for now but are slated for elimination by July 1, 2028.
The One Big Beautiful Bill Act creates two replacement options: the Tiered Standard Plan and the Repayment Assistance Plan. New borrowers will have access only to those two. The Tiered Standard Plan carries fixed monthly payments with a repayment window of between 10 and 25 years, depending on the loan balance. The Repayment Assistance Plan sets monthly payments based on income and number of dependents, with no cap on what higher earners can owe per month and income brackets that are not indexed to inflation. Borrowers with no or low income pay a floor of $10 per month. The plan includes an interest subsidy for borrowers whose full, on-time monthly payment falls short of the interest accrued since the prior due date.
Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, described the shift as a phased transition that will ultimately reduce roughly half a dozen existing plans down to just two.
Parent PLUS Borrowers Lose Income-Driven Options
New Parent PLUS loans issued on or after July 1 for parents of dependent students must be repaid under the Tiered Standard Plan, with no income-driven alternative. The law also caps new Parent PLUS borrowing at $20,000 per year and $65,000 total per dependent student.
Betsy Mayotte, president and founder of The Institute of Student Loan Advisors, said her organization is receiving daily inquiries from parent PLUS borrowers who had planned to rely on income-driven repayment and are now out of options. Existing borrowers who did not consolidate before the deadline face sharply narrowed choices.
Graduate Student Borrowing Caps Tighten
Graduate students will face new ceilings on unsubsidized federal loans: $20,500 annually and $100,000 over a lifetime. Prior loan types that allowed graduate and professional students to borrow up to their full cost of attendance are being eliminated. Some existing borrowers finishing current programs retain eligibility under old rules.
Professional students in select fields, including pharmacy, dentistry and law, face higher but still new caps of $50,000 annually and $200,000 total. A federal judge has recently halted the administration's implementation of the regulatory definition of a "professional degree," which could complicate application of those limits.
Austin noted that students whose program costs exceed new federal caps may turn to private loans, which carry greater risk and fewer federal protections than federal aid — and which not all students will qualify for.