New Federal Student Loan Rules Take Effect July 1

The federal student loan system changed significantly on July 1, 2026, when key provisions of the One Big Beautiful Bill Act took effect. The changes affect how students borrow for graduate school and how borrowers repay what they owe.

The graduate PLUS loan program ended for new borrowers starting July 1. New annual and lifetime limits now apply to graduate and parent PLUS loans. Students planning to start graduate school after this date may need to borrow less from the federal government and consider private loans to cover remaining costs.

Several income-driven repayment plans were replaced by a new option called the Repayment Assistance Plan. The transition has been bumpy. Some borrowers reported that their repayment plans did not appear in their servicer accounts, and others received inaccurate payment estimates. Borrowers in the SAVE plan have about 90 days to choose a new plan once their servicer contacts them.

The Department of Education also increased the interest rate reduction for borrowers enrolled in autopay. The discount rose from 0.25 percent to 1 percent, effective July 1. The benefit applies to federal direct loans originated after July 1, 2012, and runs through June 30, 2028. Borrowers already enrolled in autopay do not need to take any action. Those not yet enrolled have until September 30, 2026, to sign up and lock in the full discount.

Nearly 43 million Americans carry federal student loan debt. Financial advisors recommend that borrowers review their current repayment plan, check with their servicer about the transition timeline, and consider whether the new Repayment Assistance Plan fits their income and loan balance.