Federal student loan borrowers are entering a major transition as the Trump administration’s changes begin to take effect on July 1. The new rules reshape repayment, borrowing limits, and interest costs in ways that could raise monthly bills for many students and families.
According to www.cnn.com, the law behind the overhaul is the One Big Beautiful Bill Act, which Trump signed last July. The Education Department says the changes create “commonsense loan limits” and simplify repayment, but critics warn they could make college and graduate school more expensive to finance.
What Changes First
The biggest immediate shift is the rollout of a new tiered standard repayment plan and a new Repayment Assistance Plan, or RAP. The standard plan will give borrowers 10 to 25 years to repay depending on how much they borrowed, while RAP sets monthly payments at 1% to 10% of income, with at least $10 due each month.
RAP also trims payments by $50 for each dependent and cancels any remaining balance after 30 years. Student loan experts say some borrowers could pay more under RAP than under current income-driven plans because of how the programs are structured.
| Repayment Option | Key Terms | Who It Affects |
|---|---|---|
| Tiered Standard Plan | 10 to 25 years to repay, depending on loan amount | Borrowers taking new loans |
| Repayment Assistance Plan, RAP | 1% to 10% of income, at least $10 monthly, $50 less per dependent, balance canceled after 30 years | Borrowers taking new loans |
For now, those repayment options apply only to students taking out new loans, at least for the next two years. Current borrowers will not see immediate changes, but several older plans are on a countdown to disappear.
Existing Borrowers Face A Longer Shift
Most existing repayment plans, including Income-Contingent Repayment and Pay As You Earn, will be eliminated in July 2028. At that point, borrowers will have to move to the new tiered standard plan, RAP, or Income-Based Repayment.
Borrowers in the SAVE plan are already being told to switch to another option within 90 days. That group is expected to pay considerably more under RAP, experts say.
New 2026 graduates will have a choice between RAP and the tiered standard plan, but they can still use existing repayment options until July 2028.
Borrowing Limits Tighten For Graduate And Professional Students
Graduate students will no longer be able to borrow up to the full cost of attendance. Under the new limits, newly enrolling students face a $20,500 annual cap and a $100,000 lifetime cap, while current students will see those limits begin in July 2029.
The Grad PLUS loan, which had allowed graduate and professional students to borrow up to the cost of attendance, is being eliminated. For professional school students such as those in medical or law school, borrowing will be capped at $50,000 per year and $200,000 over a lifetime.
Some health-related programs were treated differently last year, when the Education Department decided that nursing, physician assistant, and physical therapy studies would not count as professional programs. A federal judge paused implementation of those lower limits last week while the lawsuits continue.
| Borrower Group | New Annual Limit | Lifetime Limit |
|---|---|---|
| Graduate Students | $20,500 | $100,000 |
| Professional Students | $50,000 | $200,000 |
| Parent PLUS Loans | $20,000 | $65,000 |
Parents And Interest Rates Are Changing Too
The Parent PLUS loan, a common tool for families helping undergraduate students, will be limited to $20,000 annually and $65,000 total for a student’s studies. Those limits apply to parents of new college students enrolling after July 1.
Parents of currently enrolled students who already use Parent PLUS loans can still borrow up to the cost of attendance for those children until the student finishes the program or for up to three academic years, whichever comes first.
Borrowers who sign up for automatic payments by September 30 will receive a one percentage-point break on interest rates, up from the current 0.25 percentage-point discount. The lower rate lasts through June 30, 2028.
That matters because the interest rate itself is rising on Wednesday to 6.52% for undergraduate loans and 8.07% for graduate loans. The rate resets each July 1, adding another layer of pressure for borrowers already adjusting to the new rules.
