Jun 11, 2026
A slate of changes to federal student loan programs will take effect in just a few weeks.
Last year, President Trump signed a sweeping tax-and-spending package that included an overhaul of federal student loan initiatives. New repayment options will be introduced starting July 1, while others like the Saving for a Valuable Education (SAVE) plan will be eliminated. Around 7.5 million borrowers were enrolled in a SAVE plan, according to the Education Department.
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In some cases, if borrowers don’t select a new repayment plan before July 1, the federal government will step in and do it for them. Here’s what you need to know to avoid unexpected surprises.
The Biden-era SAVE plan will be no more
The Biden administration rolled out the SAVE program in 2023 as an income-driven repayment plan for undergraduate and graduate student loans. It used a generous formula to enable lower monthly payments compared to prior federal student loan programs.
Borrowers in the SAVE plan haven’t been obligated to repay loans since summer 2024, but they have been accruing interest since August 2025. Republican-led states sued to block the plan, and a federal judge nixed it for good this year after a legal battle that reached the Supreme Court.
The Department of Education said in March that it would start contacting borrowers about their repayment options so they could sign up for an alternative. Loan servicers will also be sending notices to borrowers instructing them to pick a new repayment plan within 90 days. The clock starts upon receiving the letter.
The DOE has said that borrowers who don’t pick a new plan within that time frame will be enrolled into a standard repayment plan or a Tiered Standard Plan. The latter establishes fixed payments over a timeline of 10 to 25 years depending on the loan amount.
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New repayment plan options
The tiered standard plan and the repayment assistance plan (RAP) will be the two new options available after July 1. The latter sets loan repayments based on a borrower’s adjusted gross income, or AGI.
For example, a borrower earning $60,001 to $70,000 will be required to pay 6% of their AGI. That means monthly payments will range from $300 to $350. The maximum repayment period will be 30 years.
Lending limit changes
Lending limits aren’t changing for undergraduate students. Dependent undergrads can borrow up to $31,000 while independent undergrads can still borrow up to $57,500.
But that won’t be the case for graduate students. After July 1, strict limits will be set on annual and total lending amounts. If you’re a graduate student, you’ll be restricted to borrowing $20,500 per year, or $100,000 total to complete your studies. Before these changes, graduate students could borrow to finance the entirety of their program.
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The borrowing caps are tied to another major change: the elimination of Graduate PLUS loans for new borrowers after July 1. Graduate PLUS loans previously allowed students to borrow up to the full cost of attendance, minus any other financial aid they received. With that option disappearing for new borrowers, graduate students will instead be subject to the new annual and lifetime federal loan limits, potentially forcing some to seek private loans or alternative funding sources to cover the remaining cost of their education.
It gets a little tricky for borrowers currently in graduate school. As long as the loan was taken out by June 30, 2026, you may be exempted from the new limits and continue borrowing as before for three academic years or the difference between program length and how long you’ve been enrolled. Whichever figure is smaller wins out.
Parent PLUS loans will also face new borrowing caps beginning July 1, limiting how much parents can borrow on behalf of their children.
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PSLF is staying, but will require a different repayment plan
The Public Service Loan Forgiveness program remains in place. However, borrowers taking out new federal loans after July 1 will generally need to enroll in the new Repayment Assistance Plan if they want those payments to count toward PSLF.
The change arrives amid ongoing processing delays. As of March, the Education Department had nearly 90,000 pending PSLF buyback requests, with some borrowers reporting waits of more than a year for a decision.
What counts as a ‘professional degree’ is changing
Under the new federal student loan rules, students pursuing degrees in medicine, law, podiatry, dentistry, theology, pharmacy, clinical psychology, chiropractic medicine, veterinary medicine, optometry and osteopathic medicine will qualify for higher federal borrowing limits of up to $50,000 annually and $200,000 total.
Students in a number of other graduate fields will not qualify for those higher limits, including:
- Nursing
- Physician assistant studies
- Physical therapy
- Occupational therapy
- Social work
- Education
- Architecture
- Public health
- Counseling
- Audiology
- Engineering
There will be exceptions for certain “professional” degrees in 11 categories on borrowing limits. Graduate students will be allowed to borrow twice as much if they’re pursuing degrees in medicine, law, podiatry, dentistry, theology, pharmacy, clinical psychology, chiropractic, veterinary medicine, optometry and osteopathic medicine.
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Joseph Zeballos-Roig is a policy and politics journalist based in Washington D.C with a focus on economics. He is experienced in connecting the significance of events in the capital to the lives of everyday Americans whether its taxes, tariffs, interest rates or federal programs.
