Student Loan Rules Overhaul Takes Effect July 1 Under New Federal Law
The One Big Beautiful Bill Act reshaped federal student lending starting July 1, replacing income-driven repayment plans with two new options and capping how much graduate students and parents can borrow. Borrowers currently on the SAVE plan have until July 2028 to switch.
Federal student loan rules changed significantly on July 1, 2026, when key provisions of the One Big Beautiful Bill Act took effect. The law eliminated several existing income-driven repayment plans for new borrowers and replaced them with two options: the Repayment Assistance Plan and the Tiered Standard Plan.
The Repayment Assistance Plan, known as RAP, sets monthly payments at 1% to 10% of a borrower's adjusted gross income. It has a 30-year repayment term, a $10 minimum monthly payment, and a $50 monthly reduction per dependent. The plan includes a feature to prevent negative amortization but does not allow for a $0 payment.
The Tiered Standard Plan offers fixed payments over terms ranging from 10 to 25 years, depending on the total loan balance.
Borrowers who took out their first federal loan before July 1, 2026, and do not borrow again may keep their existing repayment plans. Those currently enrolled in the SAVE, PAYE, or ICR plans must transition to an eligible plan by July 1, 2028, or be automatically moved to RAP.
The law also cut how much graduate students and parents can borrow. The Graduate PLUS loan program ended for new borrowers. Graduate students are now limited to $20,500 per year in unsubsidized loans, with a $100,000 lifetime cap for most programs. Parent PLUS loans are capped at $20,000 per student per year, with a $65,000 lifetime limit per dependent.
The Department of Education also increased the interest rate reduction for borrowers enrolled in autopay from 0.25% to 1%, effective July 1.
Public Service Loan Forgiveness remains in place. The RAP and certain standard plans with terms of 15 years or longer qualify for PSLF credit.
