The United States (U.S) government has officially announced an update to its student loan rules.
The U.S Department of Education has already begun the implementation of the new student loan rules following the rollout of the Working Families Tax Cuts Act (popularly known as the One Big Beautiful Bill Act or OBBBA).
Effective July 1, 2026, these changes radically restructure borrowing limits, completely phase out highly debated repayment options like the SAVE plan, and introduce entirely new frameworks for both current and future borrowers.
Whether you are a prospective graduate student, a parent planning for your child’s college education, or an existing borrower, here is the breakdown of what you need to know to navigate the new system.
The U.S Department of Education, in a press release described the overhauling of the student loan rules as a way to streamline the system, which currently consists of seven repayment plans, and rein in student loan debt, which stands at almost $1.9 trillion.
Borrowers enrolled during the administration of former President Joe Biden’s Saving on a Valuable Education, or SAVE, plan are among those affected as the administration of U.S President Donald Trump moves to wind down the program and shift borrowers into new repayment options.
Loan payments for the roughly 7.2 million people enrolled in SAVE have been on pause for two years as a legal battle over the program’s fate played out.
New rules introduced under last year’s “big beautiful” tax and spending bill impose stricter limits on how much students can borrow to finance their studies.
One major change is to the Parent PLUS loan program, which allows parents to take out a federal loan for their child’s undergraduate education. Historically, parents could borrow up to the full cost of attending a school. Starting July 1, parents will be capped at $20,000 a year and $65,000 total per student.
New borrowing limits will also affect graduate students and those pursuing professional degrees. Grad students will still be able to take out up to $20,500 per year. But beginning July 1, a new cap will prevent them from taking out more than $100,000 for their degree.
The new U.S student loan rules also affect people pursuing professional degrees, with students in certain fields restricted to borrowing $50,000 per year and $200,000 total.
On Monday, the Education Department updated its list of fields considered professional degrees to include nursing, anesthesiology, physical therapy and a handful of others, which were previously capped at $20,500 per year.
That followed a ruling by a federal judge in a case brought by nursing advocates, who argued that being excluded from the professional designation would limit aspiring nurse practitioners’ ability to pursue degrees and exacerbate workforce shortages.
In its guidance on Monday, the Education Department said the designations could change again depending on the outcome of the litigation. For now, certain theology programs that the department originally considered professional degrees will face stricter borrowing limits.
As of July 1, new student loan borrowers are blocked from Graduate PLUS loans, which allowed people to borrow as much as they needed to fund their degree. Current Grad PLUS borrowers will be grandfathered and will still be able to access the loans, according to EdSource.
Finally, aside from a few carveouts, anyone who gets a loan on or after July 1 will have a lifetime loan cap of $257,500, according to the Education Department.
“That’s per borrower, so over the course of your educational experience, stacking undergrad and grad, that is going to be your cap,” Berkman-Breen said.
Beginning July 1, borrowers who take out a new federal student loan will have only two repayment options: the Tiered Standard Plan and a new income-driven repayment plan called the Repayment Assistance Plan, or RAP.
Borrowers with existing loans who take out a new loan after July 1 will also be subject to the new rules. Once the new loan enters repayment, all of their federal loans must be repaid under one of the two new plans, Austin said.
Current borrowers who do not take out new loans after July 1 can continue to access the existing repayment options, which include:
- Standard Repayment Plan
- Extended Repayment Plan
- Graduated Repayment Plan
- Income-Based Repayment (IBR)
- Pay As You Earn (PAYE)
- Income-Contingent Repayment (ICR)
Borrowers may also opt into the new Repayment Assistance Plan (RAP), according to Austin.
However, the One Big Beautiful Bill Act phases out the PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) plans. Borrowers enrolled in those programs must move to another repayment plan by July 1, 2028.
“They could choose from the existing plans (standard, extended, graduated, IBR) or they could enroll in RAP, if it is after July 1, 2026,” Austin said. “They would not be eligible for the new tiered standard plan.”
Anyone enrolled in the standard, extended, graduated or IBR plans can stay put as long as they don’t take out a new loan, according to Austin.
“Any of those existing plans that don’t sunset in 2028, they can just continue to repay under those plans until they pay off their loans, as long as they don’t borrow any new loans on or after July 1, 2026,” she said.
