Federal Student Loan Overhaul Takes Effect as Grad PLUS Program Ends for New Borrowers
Major changes to federal student loans took effect on July 1, 2026, following the One Big Beautiful Bill Act. The Grad PLUS loan program ended for new borrowers, and new annual and lifetime limits were placed on graduate and parent PLUS loans. A new Repayment Assistance Plan replaced several income-driven repayment options, and autopay borrowers now receive a 1 percent interest rate reduction.
Major changes to federal student loan programs took effect on July 1, 2026, following the passage of the One Big Beautiful Bill Act.
The Grad PLUS loan program ended for new borrowers. New annual and lifetime borrowing limits were placed on graduate and parent PLUS loans. The Department of Education said the changes are intended to reduce long-term debt burdens for graduate students and their families.
A new Repayment Assistance Plan replaced several previous income-driven repayment options. Borrowers previously enrolled in the SAVE plan received notice that they have a 90-day window to transition to a new repayment plan.
Borrowers who enroll in autopay now receive a 1 percent interest rate reduction, up from the previous 0.25 percent discount. The Department of Education said the increase is designed to encourage on-time payments and reduce defaults.
The changes arrive as inflation remains elevated. The consumer price index rose 4.2 percent for the 12 months ending in May 2026, a three-year high driven largely by energy costs. The Federal Reserve held its benchmark rate steady at 3.5 to 3.75 percent in June, with some officials suggesting a rate hike may come before any cuts.
Financial advisors say borrowers should review their repayment options promptly. Those with existing SAVE plan enrollment face a deadline to select a new plan before automatic reassignment occurs.
