Significant changes to the federal student loan system took effect Wednesday, bringing new borrowing limits, revised repayment options and higher interest rates for millions of current and future college students.
The reforms, enacted under President Donald Trump’s One Big Beautiful Bill Act, are intended to simplify repayment programs and reduce federal lending. Education officials say the changes establish more consistent loan limits and strengthen the long-term financial health of the student loan system, while critics argue they could make higher education less affordable for many families.
One of the biggest changes affects new borrowers, who will now choose between a new tiered standard repayment plan and a Repayment Assistance Plan (RAP). The standard plan allows repayment over 10 to 25 years, depending on the amount borrowed. Under RAP, monthly payments range from 1% to 10% of a borrower’s income, with a minimum payment of $10. Borrowers also receive payment reductions for dependents, and any remaining balance is forgiven after 30 years of qualifying payments.
Current borrowers will not see immediate changes. However, several existing repayment plans, including Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR), will be phased out by July 2028, requiring borrowers to transition to one of the remaining repayment options. Borrowers enrolled in the Biden administration’s SAVE plan, which was blocked by federal courts, are being notified they must select a different repayment plan within 90 days.
The law also establishes new borrowing caps for graduate and professional students. Graduate students enrolling in new programs can borrow up to $20,500 annually, with a lifetime limit of $100,000. Students attending professional schools, such as medical or law school, face annual borrowing limits of $50,000 and lifetime limits of $200,000. The Grad PLUS loan program, which previously allowed borrowing up to the full cost of attendance, has been eliminated.
A federal judge recently paused lower borrowing limits for certain healthcare programs, including nursing, physician assistant and physical therapy studies, while legal challenges proceed.
Parents will also face new restrictions. Parent PLUS loans for students enrolling after July 1 are now capped at $20,000 per year and $65,000 total per student. Families with students already enrolled may continue borrowing under previous rules for a limited time.
Borrowers who enroll in automatic payments by Sept. 30 will receive a temporary one-percentage-point reduction in their loan interest rate through June 30, 2028. Federal student loan interest rates also increased Wednesday to 6.52% for undergraduate loans and 8.07% for graduate loans.
Source: CNN