A major overhaul of the federal student loan system takes effect July 1, and the changes could raise monthly bills for many borrowers. Millions of Americans will also face fewer repayment choices and tighter limits on how much they can borrow.
Roughly 43 million Americans have student loan debt totaling nearly $1.7 trillion, according to the Office of Federal Student Aid, part of the Department of Education. The shift is being driven by provisions in President Donald Trump’s signature tax law, the Working Families Tax Cuts Act, along with executive orders targeting the Education Department.
What changes for repayment
The biggest move is the end of the Biden-era Saving on a Valuable Education plan, or SAVE. About 7 million borrowers are enrolled in that program, and they now have 90 days to move to a new repayment plan.
Going forward, new student loan borrowers will only have two repayment options: the Repayment Assistance Plan, or RAP, and the Tiered Standard repayment plan. The Education Department says removing the other options will make repayment simpler and easier to manage on time.
| Repayment Change | What It Means | Affected Borrowers |
|---|---|---|
| End of SAVE | Borrowers enrolled in SAVE have 90 days to switch plans | About 7 million borrowers |
| Two remaining plans | Only RAP and Tiered Standard will be available to new borrowers | New student loan borrowers |
Student loan advocates warn that the RAP plan could lead to higher monthly payments. The Institute for College Access & Success said the median U.S. household could see defaults rise and premiums increase by hundreds of dollars a month.
New borrowing limits for graduate and parent loans
The other major shift is a new cap on federal borrowing for graduate students. Until now, students could borrow up to the cost of tuition and fees, but that will no longer be the case.
| Borrower Type | New Limit | Additional Rule |
|---|---|---|
| Master’s degree students | $20,500 per year | $100,000 total |
| Professional students | $50,000 per year | $200,000 total |
| Parent PLUS loans | $65,000 lifetime limit | For parents borrowing for children’s college costs |
Most graduate borrowers will not be allowed to take out more than $257,500 in loans overall. Education experts told abcnews.com that the limits could force some students to borrow less, delay graduate school, or skip it altogether.
Clare McCann, policy director at the Postsecondary Education & Economics Research Center, said some graduate borrowers may not reach the degrees they want. “This may end up being a bit of an overcorrection,” McCann said. “We could see implications for student access.”
The Education Department says the caps are meant to curb excessive borrowing and push institutions to rein in costs. Under Secretary Nicholas Kent told abcnews.com that the goal is to make higher education more affordable and easier to understand.
“Affordability is the name of the game right now,” Kent said. “These loan caps will put downward pressure on institutions to lower their costs. We’ve got to get the cost of higher education down in this country. We’ve got to make the system less cumbersome, less complex, [and] easy to understand.”
What borrowers should do now
The Education Department has posted a repayment calculator on its website so borrowers can compare monthly bills and plans. Students can also apply for one of the two new repayment plans at StudentAid.gov, and the department says the application takes about 10 minutes.
Kent urged borrowers to stay in active repayment because broad student loan forgiveness is not expected. “There are tools available to help you to make sure that you have a manageable payment,” he said.
That warning comes after former President Joe Biden’s student loan forgiveness plan was struck down by the Supreme Court in 2023. In a 6-3 decision, the court said the Education Department exceeded its authority under the HEROES Act, a 2003 law that allows relief for borrowers during a national emergency.