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New student loan rules take effect in July
Americans carrying a federal student loan could be impacted to some changes coming next month. Also a new analysis reveals that 3.5 million Americans have lost their food stamp, SNAP benefits under President Trump’s One, Big, Beautiful Bill.
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Federal student loan rules are set to change July 1, and borrowers who wait could have fewer repayment choices than they have now. The changes affect both repayment plans and some loan programs, including Parent PLUS and graduate borrowing.
According to federal announcements and student loan experts, some existing plans will close to new borrowers, some will phase out over time, and borrowers in the SAVE plan may be moved automatically if they do not choose a new option. Borrowers who do not choose a new plan within the 90-day window provided by their loan servicer will be automatically enrolled into either the Standard Repayment Plan or the new Tiered Standard plan, according to the Department of Education.
For borrowers, as Medora Lee recently wrote, the key question is less about policy details and more about what action to take now. That includes checking which repayment plan you’re in, whether your loans were disbursed before or after July 1, and whether you need to consolidate Parent PLUS loans before the deadline. The main place to review options is studentaid.gov.
1. Check your repayment plan now
Experts say you should review your federal student loan accounts before July 1 because several repayment options are changing at once. The most immediate step is to log in to studentaid.gov and confirm what plan you are in and what options are still open to you.
Jack Wallace, director of government and lender relations at Yrefy, said borrowers may qualify for something now that would not be available later. If you wait, your available choices could narrow.
2. If you’re in SAVE, don’t assume you can stay there
Borrowers still enrolled in SAVE, the now-defunct Saving on a Valuable Education plan, are expected to be contacted around July 1 by their loan servicers and given 90 days to move to a new payment plan, according to the Department of Education announcement linked in the notes. About 7.5 million borrowers were enrolled in SAVE.
Many SAVE borrowers are in forbearance. Stacey MacPhetres of Bright Horizons said borrowers are strongly encouraged to explore and apply for other income-driven plans before the automatic deadline, because the standard plan can mean higher monthly payments. More information is available through ed.gov.
If you are pursuing Public Service Loan Forgiveness or income-driven forgiveness, MacPhetres said payments made while remaining in SAVE would not count toward that progress. She said existing borrowers can switch to IBR if eligible.
3. Parent PLUS borrowers may need to consolidate before July 1
For parents with Parent PLUS loans, the biggest action item is consolidation. Borrowers must consolidate those loans into a Direct Consolidation Loan before July 1 to remain eligible for income-driven repayment options and programs such as Public Service Loan Forgiveness.
Parents who do not consolidate by then would permanently lose access to income-driven repayment plans and PSLF. They would instead be limited to standard repayment plans, which can mean higher monthly bills.
4. Some repayment plans are closing or phasing out
Several existing repayment plans are being limited. PAYE and ICR will not be available for loans disbursed on or after July 1, and both plans are scheduled to phase out completely by July 1, 2028, with borrowers in those plans required to choose a new repayment option no later than June 30, 2028. Existing borrowers with older loans may still keep them for now.
IBR is also changing. Existing IBR plans are grandfathered for loans disbursed before July, but the plan will close to new enrollees on July 1. If you think one of these plans may fit your situation, the practical step is to confirm whether your loans qualify before the cutoff.
5. New borrowers will have fewer repayment choices
Starting July 1, only two repayment plans will be available to new borrowers: the Standard Repayment Plan and the new Repayment Assistance Plan, or RAP.
The standard plan uses fixed monthly payments over 10 to 30 years, depending on the loan. The Department of Education says it can mean higher monthly payments, but usually less total interest over time. RAP is described in the notes as an income-driven plan with payments ranging from 1% to 10% of adjusted gross income, or $10 a month for borrowers making less than $10,000 a year, with forgiveness after 30 years of repayment, though actual payments vary by income bands and can also adjust based on dependents.
6. Graduate and Parent PLUS loan limits are also changing
Borrowers planning to take out new loans for graduate school or for a dependent’s education may also want to check timing. Graduate PLUS loans will no longer be offered after July 1, though some existing borrowers may continue under older limits for up to three academic years if they had at least one disbursement before that date.
New direct unsubsidized graduate loans would be capped at $20,500 annually, with a $100,000 total cap for standard graduate programs, and $50,000 annually with a $200,000 total cap for certain professional programs. Parent PLUS loans would be capped at $20,000 per year per student, with a $65,000 lifetime limit per dependent, unless the borrower is grandfathered under the older rules.
If you expect to borrow under current rules, getting an application approved and a first disbursement made before July 1 could matter, though what ultimately determines eligibility for older rules is having a loan actually disbursed before July 1, 2026.
This story was created with the assistance of Artificial Intelligence (AI). Journalists were involved in every step of the information gathering, review, editing and publishing process. Learn more.
