Millions of federal student loan borrowers are facing significant changes to their loan terms and repayment options as new regulations take effect on July 1. These adjustments include the discontinuation of the Biden-era SAVE plan, new limits on graduate student borrowing, and reduced repayment flexibility for Parent PLUS loans.
Changes to Repayment Plans
The end of the SAVE plan, a repayment option previously offering lenient terms, is expected to increase monthly payments for many borrowers. Approximately 7.5 million borrowers were enrolled in the SAVE plan. These individuals will be notified by loan servicers and given 90 days to enroll in an alternative income-driven repayment plan. Without enrollment in a new plan by the deadline, borrowers will be automatically placed into a standard repayment option by the Education Department.
Graduate Student Loan Limits
Changes introduced by the Trump administration have revised the borrowing limits for graduate students. Under the new rules, programs designated as professional degrees will have federal student loan caps of $200,000, while other graduate programs will be capped at $100,000. Previously, graduate students could borrow up to the full cost of their degree. The revised plan, however, restores higher loan eligibility for students pursuing degrees in fields such as nursing and physical therapy, which had been subject to lower limits under an initial rule.
Parent PLUS Loans
Borrowers of Parent PLUS Loans will see further reductions in repayment options. New limits will cap Parent PLUS loans at $20,000 per student and $65,000 per family. Additionally, new Parent PLUS loans taken out on or after July 1 will no longer be eligible for income-driven repayment plans, being restricted instead to a new tiered standard payment plan.
Borrowers who consolidated their Parent PLUS Loans into a Direct Consolidation Loan before July 1 can continue to use the income-contingent repayment plan until June 30, 2028, after which they will be moved to the income-based repayment plan. Students taking out loans after July 1 will only be able to enroll in the Repayment Assistance Plan and the Income-Based Repayment Plan.
Other Loan Provisions
Changes to federal student loan interest rates are also being implemented. Borrowers enrolled in auto-pay will be eligible for a 1% rate reduction starting July 1. This is an increase from the current 0.25% discount for auto-pay users, bringing the total reduction to 0.75% for these borrowers. This rate reduction is temporary and will last until June 2028.
Involuntary collections on federal student loans remain on hold, with the administration delaying plans to withhold pay from borrowers who default on their payments. Default typically occurs when a borrower is at least 270 days behind on payments. Actions such as wage garnishment and the withholding of federal tax refunds can be initiated against borrowers in default.
There are no changes to the Public Service Loan Forgiveness Program. Previous Trump administration plans to alter eligibility requirements for participating nonprofits were blocked by federal judges.
Borrowers can access the Education Department's loan simulator to explore repayment options and find information on loan consolidation and rehabilitation programs on studentaid.gov.