The landscape of federal student loans in the United States underwent a significant transformation starting July 1, following the implementation of a comprehensive law endorsed by former President Donald Trump, often referred to as the "big and beautiful bill." These changes are set to impact tens of millions of current and prospective borrowers.
The reforms include the discontinuation of several repayment plans, the introduction of new caps on loans for graduate studies, and stringent limitations on Parent PLUS loans. This shift is expected to lead to a substantial increase in monthly payments for millions of individuals.
"The primary concern revolves around the affordability of monthly payments. I believe many borrowers will see a considerable rise in their payments, requiring them to stretch their budgets significantly or risk default," warned Michele Zampini, Associate Vice President at The Institute for College Access & Success.
The situation reflects a broader crisis: as of June, around nine million Americans are delinquent on their federal student loans, contributing to a total federal debt exceeding $1.72 trillion, according to the Department of Education.
End of the SAVE Plan
As reported by the Associated Press and cited by Telemundo 51, one of the most immediate changes affects nearly 7.5 million borrowers enrolled in the SAVE (Saving on a Valuable Education) plan. This plan was introduced by the Biden administration in 2023 but was invalidated by the Eighth Circuit Federal Appeals Court in March.
The Department of Education has started sending official notices to these borrowers, giving them 90 days to enroll in an alternative income-driven plan, or they will be automatically shifted to the standard plan with higher payments. Notifications are ongoing, so there is no universal deadline for everyone.
Current borrowers can choose from three income-driven plans: the Income-Based Repayment Plan, the Pay As You Earn Plan, and the Income-Contingent Repayment Plan.
Graduate Loan Caps
For loans taken out from July 1 onwards, graduate programs are now capped at $100,000 in total, while professional degrees—such as those in medicine, law, and dentistry—have a limit of $200,000. Previously, graduate students could secure federal loans that covered the full cost of their degree.
A court order on July 17 required the government to update its list of professional programs and temporarily restore eligibility for nursing and physical therapy, which had been excluded.
New Parent PLUS Loan Restrictions
Parent PLUS loans are now restricted to $20,000 per student and $65,000 per family. Applicants from July 1 onward will not have access to any income-based repayment plans.
"From now on, they will only have the standard repayment option, with no exemptions or safety nets to adjust it based on income," Zampini noted.
Parent PLUS borrowers who consolidated their loans before July 1 can continue using the Income-Contingent Repayment Plan until June 30, 2028.
Options for New Borrowers
Borrowers taking out loans from July will have two repayment plan choices: the Graduated Repayment Assistance Plan, which ranges from 1% to 10% of adjusted gross income with a minimum payment of $10 per month, and the Standard Graduated Plan, with fixed payments to ensure debt clearance within 10 to 25 years.
As a temporary measure, borrowers with active automatic payments will receive a 1% reduction in their interest rate—up from the previous 0.25%—effective until June 2028.
The Department of Education advises using the simulator available on StudentAid.gov, which reflects the new rules effective July 1, to compare options based on individual circumstances.
FAQs on the New U.S. Student Loan Regulations
What are the new caps for graduate loans?
Graduate programs now have a cap of $100,000 total, and professional degrees like medicine and law have a limit of $200,000.
How do the changes affect Parent PLUS loans?
Parent PLUS loans are capped at $20,000 per student and $65,000 per family, with no access to income-driven repayment plans for new applicants.
What options do new borrowers have?
They can choose between the Graduated Repayment Assistance Plan and the Standard Graduated Plan, with varying payment structures.