Major changes to the federal student loan system, affecting millions of borrowers, take effect July 1.
The changes mean some Americans, especially low-income borrowers, will face higher monthly payments on their student loans. Other borrowers will face new loan limits.
About 43 million Americans currently have student loan debt totaling nearly $1.7 trillion, according to the Office of Federal Student Aid, a division of the Education Department.
Education Secretary Linda McMahon, whose mission is to shut down the department, said the Trump administration will no longer tolerate American taxpayers taking on other people’s debts.
The overhaul of the system is part of President Donald Trump’s signature tax law, the Working Families Tax Cuts Act, which was signed into law last year along with other executive orders targeting the Education Department.
Here’s what borrowers need to know:
Fewer repayment options
The Education Department and education experts are touting the Trump administration’s overhaul of student loans as the biggest change to the loan portfolio in decades.
One of the biggest changes is the end of a Biden-era loan repayment program called Savings for Valuable Education, or SAVE. There are approximately 7 million borrowers currently enrolled in the program, and they will now have 90 days to switch to a new plan to pay off their student debt.
There will be only two repayment plans that new student loan borrowers will be able to choose from: the Repayment Assistance Plan (RAP) or the Tiered Standard Repayment Plan. The Education Department says phasing out other plans will make the process of paying borrowers on time smoother and easier.
But student loan advocates warn that monthly payments under a RAP plan will be higher for borrowers. The Institute for College Access and Success (TICAS) found that the average U.S. household could see a sharp rise in student loan defaults, with insurance premiums increasing by hundreds of dollars per month.
New borrowing limits
Another big change is limiting the amount of loans graduate students can borrow. Before this change, students could take out loans equal to the cost of their tuition and fees.
As of July 1, graduate students pursuing a master’s degree will only be able to take out federal loans up to $20,500 per year or $100,000 in total.
Professional students, including law and medicine, will be able to borrow up to $50,000 per year or $200,000 in total.
There are also new limits on Parent PLUS loans, which now amount to a lifetime limit of $65,000 on loans to parents for their children’s college education. In general, most graduate borrowers will not be allowed to take out loans in excess of $257,500.
Education experts who spoke to ABC News emphasize that the Trump administration’s restrictions could significantly reduce graduate student borrowing or force some borrowers to forego graduate school altogether.
Claire McCann, policy director at the Center for Postsecondary Education and Economic Research (PEER), told ABC News that it’s possible that some graduate borrowers won’t get the degrees they want.
“This could end up being a bit of an overcorrection,” McCann said. “We could see the implications for student access.”
Meanwhile, the Department of Education says these new restrictions will “limit excessive borrowing and force institutions to evaluate their costs.” Deputy Education Secretary Nicholas Kent told ABC News the restrictions would make higher education more accessible to millions of Americans.
“Affordability is the name of the game right now,” Kent said. “These borrowing restrictions will put downward pressure on schools to reduce their costs. We must lower the cost of higher education in this country. We have to make the system less cumbersome, less complex (and) easier to understand.”
Secretary of Health and Human Services (HHS) Robert F. Kennedy Jr. stands next to Under Secretary of Education Nicholas Kent, Centers for Medicare and Medicaid Services (CMS) Administrator Dr. Mehmet Oz, and University of Tennessee Health Science Center Vice Chancellor for Research Dr. Jessica Snowden speaks during a nutrition education event at the Department of Health and Human Services in Washington, D.C., June 8, 2026.
Kylie Cooper/Reuters
Former President Joe Biden tried to create a signature student loan forgiveness plan to relieve some of the student loan debt for more than 40 million American borrowers, but it was struck down by the Supreme Court in 2023.
In a 6-3 decision, the court ruled that Biden’s Education Department had exceeded its authority under the HEROES Act, which is a 2003 law that says the government can provide relief to student loan recipients in the event of a “national emergency.”
What should borrowers do now?
The Department of Education has created a “repayment calculator” on its website that students can use to calculate their monthly bills and compare plans.
Borrowers can apply for one of two new repayment plans at StudentAid.gov. The Department of Education says the application will take 10 minutes to complete.
The Department of Education building in Washington, DC, November 18, 2024.
Jose Luis Magana/AP, FILE
Kent, the deputy education secretary, urged students to get back to actively repaying their loans because the broad student loan forgiveness that was once promised to borrowers is not going to happen.
“(Borrowers) are responsible as the one who took out the loan to repay it,” Kent said. “It’s not your neighbor’s job to pay off your loan, it’s your job to pay off your loan, but there are tools to help you make sure you have a manageable payment.”