Federal student loan policies are poised for significant changes beginning July 1, 2026, affecting both current borrowers and those planning to finance education in the fall 2026 semester. The overhaul, enacted by the One Big Beautiful Bill Act (OBBBA), introduces new repayment options, alters borrowing limits, and phases out certain loan programs, marking one of the most substantial shifts in federal student lending.
Changes for Existing Borrowers
For individuals already repaying federal student loans, the primary change involves the simplification of repayment plans. While some existing generous plans will continue until 2028, two new options will become available starting July 1: the Repayment Assistance Plan (RAP) and the Tiered Standard Repayment Plan (TSRP).
RAP is an income-driven repayment plan that bases monthly payments on a borrower's adjusted gross income and the number of dependents. The TSRP, conversely, is a fixed-payment plan where the repayment term is determined by the borrower's total loan balance. Robert Farrington, founder of The College Investor, described the TSRP as a hybrid of current standard and extended repayment plans.
Borrowers in the now-terminated SAVE plan face immediate transitions. The Education Department will notify these borrowers starting July 1, giving them a 90-day window to select a new repayment plan. Failure to do so may result in automatic placement into a Standard or TSRP plan.
Borrowers enrolled in the Pay As You Earn (PAYE) or Income-Contingent Repayment (ICR) plans have a longer transition period, with these plans phasing out by June 30, 2028. The Income-Based Repayment (IBR) plan will remain available for many existing borrowers.
New Rules for Future Borrowers
Students and parents planning to borrow for the fall 2026 semester will encounter revised borrowing limits and program structures.
Undergraduate borrowing limits remain unchanged since 2008. However, the Parent PLUS loan program will see substantial modifications. Effective July 1, 2026, annual borrowing for Parent PLUS loans will be capped at $20,000, with a lifetime limit of $65,000 per dependent student. These loans will also lose eligibility for income-driven repayment and Public Service Loan Forgiveness (PSLF).
Graduate students face the most significant changes. The Grad PLUS loan program is being phased out for new borrowers, and regular graduate student loan borrowing will be capped for the first time. Annual limits will be set at $20,500, with a lifetime maximum of $100,000. Professional degree students, such as those in law or medicine, will have annual caps of $50,000 and a lifetime maximum of $200,000.
These new caps may necessitate increased reliance on private loans, particularly for higher-cost graduate and professional programs. Experts anticipate this could lead to a doubling of the private loan market for graduate borrowers.
Preparing for the Changes
Farrington advises borrowers to proactively assess their current loan situation. This includes logging into StudentAid.gov, updating contact information, confirming their current repayment plan, and understanding available options. Borrowers pursuing PSLF should be particularly diligent, as not all repayment plans qualify for forgiveness.
For prospective students and parents, understanding how the new federal limits apply to their specific educational costs is crucial. The changes to Parent PLUS and Grad PLUS loans could create funding gaps, requiring families to explore additional savings or private financing options to cover the full cost of attendance.
The OBBBA implementation timeline includes key dates such as July 1, 2026, for the issuance of SAVE plan notices and the activation of new caps and repayment plans. Legacy plans like PAYE and ICR have a final sunset date of June 30, 2028.