Starting July 1, sweeping changes are reshaping federal student loans, fundamentally altering borrowing limits, repayment plans, and forgiveness timelines for new borrowers. With the elimination of the SAVE plan and changes to Graduate and Parent PLUS loans, both current and prospective students face a radically different financial landscape.
Here is the breakdown of the major changes you need to know:
1. New Borrower Repayment Restrictions
Anyone who takes out a federal student loan after July 1 is classified as a “new borrower” and faces heavy restrictions on how they can repay their debt.
- Fewer Options: Borrowers will be limited to just two repayment plans instead of the previous six.
- Repayment Assistance Plan (RAP): Monthly payments range from 1% to 10% of earnings, but forgiveness requires 30 years of payments (up from 20).
- Tiered Standard Plan: Fixed payments over four possible timeframes.
Existing borrowers retain access to older, more favorable Income-Based Repayment (IBR) plans, making new borrowing decisions far more consequential.
2. The SAVE Plan is Gone
The SAVE repayment plan has been eliminated, throwing previous assumptions about affordable monthly payments out the window. Borrowers transitioning off this plan are seeing their monthly payments jump significantly.
- Check Your Dashboard: Because plan cancellations or transfers might have caused servicer processing errors, it is critical to log into StudentAid.gov to verify your current active plan and payment amount.
3. Lower Borrowing Limits & Caps
To combat rising education debt, strict new limits are being placed on how much individuals can borrow:
- Graduate Students: The Graduate PLUS loan is eliminated for new borrowers. Overall borrowing limits for graduate students are dropping from $138,500 to $100,000.
- Professional Students: Capped at $50,000 per year with a $200,000 lifetime limit.
- All Borrowers: A strict new $257,500 lifetime cap applies to all federal loan borrowers.
