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Changes are coming to student loans and repayment options. Most of these changes will start on July 1, 2026. Congress passed legislation –“The One Big Beautiful Bill Act”--through reconciliation, a process that allows Congress to approve certain budget-related changes with a simple majority instead of the usual 60 Senate votes. The bill passed along party lines, with most Republicans in support and all Democrats in opposition, and President Trump signed it into law on July 4, 2025. 

At a high level, the One Big Beautiful Bill Act cuts taxes, reducing the amount of funding coming into the government by $4.5 trillion over the next decade by continuing income tax cuts passed in 2017. To offset the loss of revenue, the new law reduces federal spending by $3.5 trillion over the next decade, primarily by cutting social programs. While the legislation includes significant changes to tax policy and big cuts to healthcare and food assistance programs (see CBS News coverage for more details), this blog focuses only on the changes to student loans. The new law does not impact the FAFSA or the Pell Grant. The FAFSA opened at the end of September, and the Pell Grant is still available as it was before. 

Undergraduate Loans

Available loan amounts may start to change

Parent PLUS Loans

New caps on Parent PLUS loans

Effective July 1, 2026, for new Parent PLUS loan borrowers, there are new limits to the amounts they can borrow: $20,000 per year per dependent student and $65,000 lifetime total per student. Currently, parents of dependent undergraduates can borrow up to the full cost of attendance each year. Parents who have already borrowed a Parent PLUS loan before July 1, 2026, will still be able to borrow according to current rules, meaning they can still borrow up to the full cost of attendance each year, until their dependent child completes their currently enrolled program or for three academic years (whichever is shorter).

Graduate and Professional Student Loans

Grad PLUS Loans eliminated 

Students enrolling in graduate programs after July 1, 2026 will no longer be able to borrow Grad PLUS loans. Current students enrolled in a graduate or professional program who borrowed Grad PLUS loans before July 1, 2026, can continue to borrow Grad PLUS loans for the remainder of their program or up to three academic years (whichever is shorter).

New definitions and limits for Direct Unsubsidized Loans

The law introduces new terminology, including “graduate students” and “professional students.” Graduate students can borrow up to $20,500 in Direct Unsubsidized Loans each year, with a lifetime borrowing cap of $100,000. Professional students are eligible to borrow up to $50,000 annually, with a lifetime maximum of $200,000. While we can expect that professional students will include people enrolled in medical or law school, we do not yet know the complete definition of “professional” versus “graduate”. The US Department of Education is in the process of creating regulations that will establish this definition, so there is more information to come. 

Student Loan Repayment

There are changes for both new loans taken out after July 1, 2026, and for already borrowed loans. 

For borrowers with a new loan taken out after July 1, 2026

For loans issued or consolidated on or after July 1, 2026, only two repayment options will be available instead of the multiple income-based repayment plans currently available. 

1. Standard Repayment Plan
   This plan will require fixed monthly payments over 10 to 25 years, depending on the total amount borrowed.

• Loan balance up to $25,000: 10-year fixed repayment term
• Loan balance between $25,000 and $50,000: 15-year repayment term
• Loan balance between $50,000 and $100,000: 20-year repayment term
• Loan balance over $100,000: 25-year repayment term

      Borrowers may choose to pay down their loan balances faster than the repayment term without       
      facing pre-payment penalties.

2. Repayment Assistance Plan (RAP) This will be the only income-based payment plan available to new borrowers. Payments will be determined based on the borrower’s adjusted gross income. The minimum payment will be $10 per month for those with an annual income of under $10,000, and the maximum payment will be 10% of the adjusted gross income of $100,000 a year or more. Borrowers enrolled in RAP will have their remaining student loans canceled after 30 years of payments. The RAP plan will be the only repayment plan eligible for the Public Service Loan Forgiveness program.
   
   Under RAP, borrowers will no longer see their loans grow while they are in repayment, as the government will waive any interest remaining after a borrower makes their monthly payment. For example, if a monthly payment is $50, but the borrower owes $75 in interest, the remaining $25 will be waived.
   
   Under RAP, the loan repayment amount will have $50 subtracted from each month’s payment for each dependent child.

For borrowers with loans taken out before July 1, 2026

A current borrower who takes on a new loan or consolidates their existing loans after July 1, 2026, will be treated as a new borrower and will only have access to the Standard Repayment Plan or the Repayment Assistance Plan.

For current borrowers, the income-based repayment plans SAVE, PAYE, and ICR will phase out by 2028. Borrowers will need to transition into either the current Income-Based Repayment (IBR) plan, which is available solely to current borrowers, or the new Repayment Assistance Plan by July 1, 2028. Previously, borrowers had to demonstrate a “partial financial hardship” to access IBR. The new law has removed this requirement, making more current borrowers eligible for IBR.

For borrowers in the SAVE plan, multiple lawsuits have been filed regarding the plan, resulting in payments being paused until the lawsuits are resolved by the courts. However, the Trump Administration restarted accruing interest on these loans on August 1, 2025. Time spent in the SAVE plan does not count towards income-driven repayment plan cancellation or the Public Service Loan Forgiveness program. SAVE participants can:

• Switch to another income-driven repayment plan: IBR, ICR, or PAYE until they end in 2028. Information about these income-driven repayment plans can be found on the Department of Education website. 
• If one is eligible for the Public Service Loan Forgiveness program, one may be able to “Buyback” forgiveness credit for the months spent in lawsuit-related forbearance. 
• Make interest-only payments. This would keep the loan balance from increasing as interest accrues. However, these payments would not be eligible for Public Service Loan Forgiveness.
• Do nothing and wait until either the lawsuits are decided or the borrower must move to IBR or RAP by July 1, 2028. However, interest will accrue, and time spent will not count towards Public Service Loan Forgiveness. 

Other Changes to Student Loan Repayment

Currently, borrowers can pause their payments for up to three years through unemployment deferment if they are receiving unemployment benefits or are currently searching for full-time employment, and economic hardship deferments if they are receiving public assistance, earning less than the minimum wage, or serving in the Peace Corps. With the new law, borrowers who take out new loans after July 1, 2027, will have reduced options for seeking forbearance. Borrowers are currently able to enter into these payment pauses, known as forbearance, for up to 12 months at a time. Under the new law, a borrower can be in forbearance for up to 9 months during a two-year period. 

If borrowers are currently in default, they should research their options on the Department of Education’s website to determine the best course of action for them. In May 2025, the federal government restarted collections on student loans. There is no statute of limitations on collecting student loan debts, and the government does not need to go to court to start collections.

What happens next?

Congress has passed the new law, and now the US Department of Education needs to establish regulations that provide details on how the new law will be implemented. The Department is currently negotiating these new regulations, which are expected to be released in 2026. These details will help provide clarity on things like what counts as a graduate or professional program, and uAspire will continue to share information about these changes.