Major federal student loan changes take effect July 1, bringing new repayment options and new borrowing limits for millions of borrowers. The changes are part of a Trump administration overhaul of the federal student loan system.
Federal Student Loan Changes Start July 1
The U.S. Department of Education says the new rules will simplify repayment and limit excessive borrowing. However, some borrowers could see higher monthly payments.
Two new repayment options begin July 1. One is the Repayment Assistance Plan, known as RAP. The other is a new Tiered Standard Plan.
Under RAP, monthly payments are based on income and family size. The Department of Education says the plan is designed to help borrowers avoid growing balances when they make full, on-time payments.
The Tiered Standard Plan sets fixed repayment terms of 10, 15, 20 or 25 years. The term depends on a borrower’s total loan balance.
SAVE Borrowers Must Choose a New Plan
Borrowers enrolled in the SAVE Plan will receive notices from their loan servicers starting July 1. The Department of Education says they will have at least 90 days to choose a new repayment plan.
Borrowers who do not act by their servicer’s deadline may be moved into the Standard Repayment Plan or the new Tiered Standard Plan. Those plans may cost more per month than income-driven options.
The SAVE Plan was created under the Biden administration. It later faced legal challenges and is now being phased out.
Borrowers do not need to act before July 1. However, they should watch for notices from their loan servicer and review repayment options carefully.
Graduate and Parent Borrowing Rules Change
The July 1 changes also affect future borrowing. The Department of Education says the Grad PLUS loan program will be eliminated for new graduate and professional student borrowers.
Some current Grad PLUS borrowers may keep limited access while finishing their programs. New borrowers will face new annual and lifetime loan limits.
Parent PLUS loans will also face new caps. The changes could affect families who use federal loans to help pay for a child’s college costs.
Undergraduate federal loan limits are expected to remain mostly unchanged. Still, schools may have more authority to limit borrowing by program in some cases.
What Borrowers Should Do Now
Borrowers should log in to StudentAid.gov and confirm their loan servicer information. They should also make sure their email and mailing address are current.
SAVE borrowers should compare repayment plans before choosing a new option. The lowest monthly payment may not always be the best long-term choice.
Students planning for graduate or professional school should check with their school’s financial aid office. The new loan limits may change how much federal aid is available.
Parents considering PLUS loans should also review the new caps before borrowing.
The changes arrive as many families continue to manage rising college costs. For borrowers in Texas and across the country, the most important step is to stay informed and respond quickly when loan servicers send official notices.