Federal Student Loan Rules Overhaul Takes Effect July 1
Major changes to federal student loan programs took effect on July 1, 2026, under the One Big Beautiful Bill Act. The graduate PLUS loan program ended for new borrowers, a new repayment plan replaced existing income-driven options, and the autopay interest rate discount increased from 0.25 percent to 1 percent.
Federal student loan rules changed significantly on July 1, 2026, when provisions of the One Big Beautiful Bill Act took effect. Borrowers, schools, and financial aid offices are working through the details of a system that looks different from what existed before.
The most immediate change for new borrowers is the end of the graduate PLUS loan program. Graduate students who start borrowing after July 1 can no longer take out PLUS loans, which had no annual cap. Instead, new annual and lifetime borrowing limits apply to graduate and parent PLUS loans. The change is intended to reduce the amount of debt students accumulate, but critics say it will make graduate school unaffordable for students who cannot cover costs through other means.
The income-driven repayment landscape also changed. The existing suite of plans, including SAVE, PAYE, and IBR, has been replaced by a single option called the Repayment Assistance Plan. Borrowers who were enrolled in SAVE, which was blocked by courts in 2025, are being transitioned to the new plan. Early reports indicate technical difficulties with the transition, including inaccurate payment estimates on the federal student aid website.
One change that benefits borrowers is an increase in the autopay interest rate discount. Borrowers who authorize automatic payments from a bank account now receive a 1 percent reduction in their interest rate, up from 0.25 percent. For borrowers with large balances, the difference adds up over time.
The Department of Education is also working to simplify account opening for Trump Accounts, a separate child investment program, by allowing newborns to be enrolled at the same time their Social Security numbers are issued.
Financial aid advisors are urging borrowers to log into their studentaid.gov accounts to verify their repayment plan and payment amounts before their next bill is due.
