Federal student loan terms can change from one academic year to the next. For instance, every spring, the Treasury Department determines the fixed interest rate for federal student loans for the upcoming award year, which runs from July 1 to June 30. Borrowers know that if they take federal loans every year of college, each one will likely come with a different interest rate.
But major overhauls to federal student loans—like the changes that went into effect as of July 1, 2026—tend to catch borrowers by surprise. In this case, the passing of the One Big Beautiful Bill Act (OBBBA) last year made so many adjustments at once that you might not know what exactly’s going on at the Department of Education.
While there are many changes to federal student loan rules and regulations, there are three major changes that are most likely to affect borrowers. Here’s what you need to know about these important adjustments to federal student loan rules:
The repayment plan shuffle
As of July 1 of this year, the Saving on a Valuable Education (SAVE) repayment plan has been eliminated. This income-driven repayment (IDR) plan set borrowers’ monthly payments as a portion of income, and payments could be as low as $0.
As of the beginning of this month, loan servicers began issuing notices to current borrowers on the SAVE plan, letting them know they had 90 days to enroll in a different repayment plan or be automatically enrolled in another plan. This change affects current borrowers.
Two other IDR plans are also on the chopping block: the income-contingent repayment (ICR) plan and the pay as you earn (PAYE) plan. Unlike the SAVE plan, ICR and PAYE will not go away immediately. Borrowers on these plans may stay on them until July 1, 2028. (The Department of Education’s language specifies that the OBBBA eliminates these plans in the future, but no later than July 1, 2028. So borrowers might be kicked off these repayment plans before summer of 2028.)
The department does have two shiny new IDR plans to replace the ones that have been axed: the tiered standard repayment plan and the repayment assistance plan (RAP). Under the tiered plan, your payments are fixed at an amount that ensures you’ll have the loan paid off within 10 to 25 years. With the RAP option, your monthly payment is set as a percentage of your annual income, divided by 12.
The department offers a repayment plan calculator that will help you determine which option will work best for your budget.
The graduate loan caps
Prior to the 2026-2027 academic year, borrowers returning to academia for grad school, med school, law school, veterinary school, dental school, or another professional degree could take out a Graduate PLUS loan to help pay for it.
These loans didn’t come cheap. For the 2025-2026 school year, the Grad PLUS loan had a fixed interest rate of 8.94% and a fixed origination fee of 4.228%. But graduate and professional students could borrow up to the cost of attendance, and count on the federal student loan perks and protections. The aggregate limit for these loans was $138,500, including any federal loans taken for undergraduate education.
Unfortunately, Trump’s Department of Education has discontinued the Grad PLUS loan. Graduate and professional students may now access federal funds only through the Direct Unsubsidized Loan program. For the 2026-2027 school year, the fixed interest rate for Direct loans for graduate and professional students is 8.07%, and the loan has an origination fee of 1.057%.
The department has also placed strict limits on how much graduate and professional students may borrow for their education. Specifically, you can borrow up to:
- $20,500 per year/$100,000 lifetime for graduate programs
- $50,000 per year/$200,000 lifetime for professional programs
Additionally, the OBBBA provided a narrow definition of what constitutes a “professional” program, allowing the borrowers to access the higher $50,000 per year loan limit. The initial definition had only the following 11 program fields:
- Pharmacy (PharmD)
- Dentistry (DDS or DMD)
- Veterinary Medicine (DVM)
- Chiropractic (DC or DCM)
- Law (LLB or JD)
- Medicine (MD)
- Optometry (OD)
- Osteopathic Medicine (DO)
- Podiatry (DPM, DP, or PodD)
- Theology (MDiv or MHL)
- Clinical Psychology (PsyD or PhD)
However, a federal court blocked that narrow definition on June 24, 2026, and the department is temporarily treating additional programs such as rabbinical studies, audiology, family psychology, speech-language pathology, and registered nursing (among others) as professional degrees rather than graduate degrees.
Even if the department satisfactorily updates its definition of professional degrees, the lower annual borrowing limits for both graduate and professional degrees may make it difficult for students to fully fund their education.
The limitations on parent loans
Parents who want to help pay for their children’s education may choose to take out a federal Parent PLUS loan. Prior to July 1, parents could borrow up to their child’s cost of attendance each year that they took out a PLUS loan.
Existing Parent PLUS borrowers who have taken out loans for their students prior to July 1 may continue to take PLUS loans for up to the annual cost of attendance for an additional three years or until the child’s program ends. However, new Parent PLUS borrowers are now limited to $20,000 per dependent student per year, with a lifetime aggregate limit of $65,000 per dependent student.
These PLUS loans are typically the most expensive federal student loans available. Parent PLUS loans for the 2026-2027 academic year have a fixed interest rate of 9.07% and an origination fee of 4.228%. Considering these costs, setting borrowing limits on Parent PLUS loans may not necessarily be a bad idea.
That said, the rapid implementation of this borrowing limit may leave some parents and students scrambling if they were counting on Parent PLUS loans to fill the gaps.
Be a loan star
The rules for federal student loans may have changed so fast you got whiplash, but that doesn’t mean you’re doomed to a life of debt to Sallie Mae. Understanding how these changes may affect your specific loans or repayment plans is the first step to conquering education debt.
If you’re a current borrower, make sure you’re clear on what repayment options are available to you. The SAVE plan is kaput, and ICR and PAYE are on their way out, so crunch the numbers using the Department of Education repayment calculator to find the right plan for your situation.
New graduate students face loan caps of $20,500 per year and new professional students can borrow no more than $50,000 per year, rather than the previous, more generous cost-of-attendance annual limit. The definition of a professional program is also up in the air, making it more difficult for potential professional students to plan their studies. Staying up to date on the news coming out of the Department of Education can help you remain agile as the courts and the department make their decisions about professional programs.
Parents are also facing new borrowing limits on PLUS loans, with a cap of $20,000 per year per dependent student, and a $65,000 aggregate limit per child. Since these PLUS loans are expensive, it makes sense to use these new limits as an opportunity to explore other funding sources, including scholarships and grants, that your child won’t have to pay back.