New Federal Student Loan Rules Take Effect July 1, Affecting Millions of Borrowers
Major changes to the federal student loan system went into effect on July 1, 2026. The One Big Beautiful Bill Act ended the grad PLUS loan program for new borrowers and replaced several income-driven repayment plans with a new option called the Repayment Assistance Plan.
A sweeping overhaul of the federal student loan system took effect July 1, 2026, bringing significant changes for current and future borrowers.
The changes stem from the One Big Beautiful Bill Act, signed into law in 2025. Starting July 1, the graduate PLUS loan program ended for new borrowers. New annual and lifetime borrowing limits now apply to graduate and parent PLUS loans. Several income-driven repayment plans have been replaced by a single new option called the Repayment Assistance Plan.
Nearly 43 million Americans carry federal student loan debt. The changes affect how many of them borrow for school and repay what they owe.
The rollout has been bumpy. Some borrowers report technical glitches, including repayment plans that do not appear in their accounts and inaccurate payment estimates. The Department of Education said it is working to resolve the issues.
Borrowers currently in the SAVE plan have about 90 days to choose a new repayment option once their loan servicer contacts them. Acting early can help avoid a costlier plan or a missed payment.
One piece of good news: the Department of Education also announced that borrowers enrolled in autopay will receive a 1% interest rate reduction starting July 1, up from the previous 0.25% discount. Borrowers who are not yet enrolled in autopay have until September 30 to sign up and lock in the full discount.
Students planning to start graduate school after July 1 may need to borrow less from the government and consider private loans to fill any gap.
Financial advisors recommend reviewing current repayment plans and contacting loan servicers directly with questions.
