Attention federal student loan borrowers: There are major changes coming your way starting Wednesday.
That’s when many of the provisions contained in President Donald Trump’s sweeping “One Big Beautiful Bill” legislation come into effect.
Some borrowers, especially those with low incomes, will face higher monthly payments. New professional undergraduate and graduate students will face tightening credit limits. Parents will also face tighter limits on how much they can borrow to help their children.
The U.S. Department of Education says the reforms implement “common-sense lending limits,” simplify repayment options and improve the state of the federal student loan system. But critics are concerned that the changes will make it harder and more expensive for students to finance their education and subsequently repay their loans.
Federal student loans are critical to many Americans’ ability to attend college or graduate school. As of March, nearly 43 million borrowers had student loans totaling $1.7 trillion, according to the Federal Student Aid Administration.
Here’s what borrowers need to know.
The law that Trump signed last July created a new tiered standard repayment plan and a new Repayment Assistance Plan known as RAP.
Under the standard plan, borrowers will have between 10 and 25 years to repay their loans, depending on the loan amount. Those with higher balances will have more time to pay off their loans, resulting in lower monthly payments.
In a RAP plan, borrowers’ monthly payments will range from 1% to 10% of their income, depending on how much they earn, although they must pay at least $10 per month. They will receive a $50 reduction in monthly payments for each of their dependents, and any remaining balances will be eliminated after 30 years of payments.
Student loan experts say some borrowers will pay more under RAP than under current income-driven repayment options because of the structure of loan repayment programs.
It’s important to note that these new repayment plan options only apply to students taking out new loans for at least the next two years.
Borrowers who are currently repaying their loans will not see any immediate changes. However, most existing repayment plans, including the Income Related Repayment (ICR) plan and the Pay As You Earn (PAYE) plan, will be phased out from July 2028. At that time, borrowers will have to switch to a new tiered standard repayment plan, RAP, or income-based repayment plan.
Participants in the Savings for Valuable Education (SAVE) plan—an income-based repayment plan during the Biden administration that was blocked by federal courts—are now being notified that they must switch to an alternative plan within 90 days. Under the RAP, they will pay significantly more, experts say.
Class of 2026 has the option to choose a new RAP or a tiered standard repayment plan, but also has access to existing repayment options through July 2028.
Graduate students will no longer be able to take out “cost of attendance” loans for their programs.
The new limits, which take effect Wednesday for new students and July 2029 for current students, will be $20,500 annually and $100,000 lifetime.
Additionally, the Grad PLUS loan, which allowed professional and graduate students to borrow up to the cost of their education, will be eliminated.
For those enrolling in professional schools, such as medical or law school, borrowing capacity will be limited to $50,000 per year and $200,000 lifetime. The previous limitation was “cost of tuition,” which averages about $60,000 per year for U.S. medical schools, according to the education research group.
Last year, the Department of Education took the controversial step of ruling that some health professions, such as nursing, physician assistants and physical therapy, are not considered vocational programs. This means that students pursuing this career will be subject to a lower annual loan limit of $20,500.
The move has prompted several lawsuits, and a federal judge last week paused enforcement of the lower limits while cases work their way through the court system.
A popular loan that parents use to help their undergraduate students, the Parent PLUS loan, will be limited to $20,000 per year and a total of $65,000 over the student’s lifetime. The previous limit for these credits was “cost of visit.” The new restrictions apply to parents of new students entering college after July 1.
But parents of currently enrolled students who have taken out Parent PLUS loans can borrow an amount equal to the cost of those children’s tuition until they complete their programs or for up to three academic years, whichever comes first.
Borrowers who sign up for automatic payments before September 30 will receive a one percentage point discount on interest rates, down from the current 0.25 percentage point discount.
The reduced rate, which serves as an incentive to attract more borrowers to participate in the autopay program, will last until June 30, 2028.
On Wednesday, interest rates rose to 6.52% for student loans and 8.07% for graduate loans. The rate is adjusted on July 1 of each year.