How you borrow, pay off student loans may change on July 1: What to know

Education How you borrow, pay off student loans may change on July 1: What to know Comments: by Addy Bink - 06/30/26 12:35 PM ET Comments: Link copied by Addy Bink - 06/30/26 12:35 PM ET Comments: Link copied

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(NEXSTAR) — If you owe back federal student loans, or are hoping to get some soon, you could be impacted by the widespread changes rolling out on Wednesday that cut back on repayment options and cap borrowing limits.

More specifically, on July 1, the Biden-era Saving on a Valuable Education plan (better known as the SAVE plan) will end, limits will be imposed on how much graduate students and parents (through the Parent PLUS loans) can borrow in federal student loans, and a graduate borrowing program will end.

Whether you are a current borrower, a future borrower, or someone working to pay back their federal student loans, here’s what you need to know.

What’s happening to the SAVE plan?

The SAVE plan will essentially cease to exist on July 1, the Department of Education announced in December. Upwards of 7 million federal student loan borrowers were enrolled in the plan, which gave some monthly payments as low as $0.

Payments for those on the SAVE plan have been paused since July 2024 due to legal challenges, though interest has been accruing since August 2025.

On Wednesday, impacted SAVE plan borrowers are expected to be notified that they have a deadline to switch to a new repayment option. If they do not take action, they will automatically be enrolled in one of two new repayment plans: the Repayment Assistance Plan, a 30-year option which is also launching on July 1, and the Tiered Standard Plan, a standard option that gives loans a 10- to 25-year life span.

Either could increase monthly payments by hundreds of dollars. RAP and the Tiered Standard Plan will also be the only two plans available for those who take out loans after the plans launch on July 1.

There are two additional payment options – Pay as You Earn, or PAYE, and the Income-Contingent Repayment, or ICR, plan. These will be phased out in 2028, and you can only enroll if your monthly payments on RAP or IBR would be higher. You can compare student loan repayment options on the Federal Student Aid Office’s website to find out what works best for your situation.

If you will not be taking out any more federal student loans, you could switch to the Income-Based Repayment Plan, or IBR. A handful of loans made to parents are not eligible for IBR: Direct PLUS Loans, Direct Consolidation Loans that repaid PLUS loans, FFEL PLUS Loans, and FFEL Consolidation Loans that repaid PLUS loans. Federal Perkins Loans are only eligible if your loans have been consolidated.

Limits on Parent PLUS loans, repayment options

Loans taken out by parents to cover their child’s college education will be capped starting Wednesday, and how those loans are repaid will be changing.

Parent PLUS loans will now be limited to $20,000 borrowed per year, with a total limit of $65,000.

There are exceptions, according to the National Association of Student Financial Aid Administrators. If your student was enrolled in the program before Tuesday, June 30, 2026, and you have received a Parent PLUS loan disbursement for that program, or your student received a subsidized or unsubsidized Direct Loan for that program before Wednesday, July 1, your loans will not be subject to the limits.

The NASFAA notes that, after three school years, or if the student withdraws, ends enrollment, or completes their program earlier, the exceptions end and the loan limits are imposed.

If you have Parent PLUS loans, but none are being disbursed on or after July 1, you can continue to use the Standard, Graduate, or Extended repayment plans, according to the Federal Student Aid (FSA)_office. If you applied to have your PLUS loans consolidated into a Direct Consolidation Loan, you are also eligible for the Income-Contingent Repayment (ICR) Plan. More details on that can be found here.

Any Parent PLUS loans taken out or consolidated after Wednesday will only be eligible for the Tiered Standard Plan for repayment. These borrowers will not qualify for an income-driven repayment plan or Public Service Loan Forgiveness, per the FSA.

Changes for graduate students

Also set to take effect on July 1 are limits on how much graduate students can borrow in federal student loans. Under the One Big Beautiful Bill Act, graduate students can borrow up to $20,500 annually and $100,000 cumulatively.

Professional students will be limited to $50,000 a year and $200,000 overall. (More than two dozen states, plus the District of Columbia, sued over the loan limits last month.)

As part of the change, the Graduate PLUS program, with its unsubsidized, no-limit loans, will be phased out. If you are a borrower in this program, you are exempt from the aforementioned limits for three years, as long as you remain enrolled in the same program of study at the same school and received a loan disbursement before Wednesday.

Like other borrowers, graduate borrowers will now only have access to the RAP and Tiered Standard repayment plans. If you have graduate loans, but take no new loans after July 1, you can continue repaying your loans using PAYE or ICR until they’re phased out in two years.

What else should student loan borrowers know?

There is now a limit on how many federal student loans you can borrow. Your lifetime maximum is $257,500, including subsidized, unsubsidized, and PLUS loans. There was previously no limit.

The Education Department recently announced a bit of relief to borrowers, too. If you are enrolled in auto pay on your loans, you can receive a 1% decrease in your interest rates starting on Wednesday. This will be available through June 30, 2028, and you have until September 30 of this year to enroll if you aren’t already.

Borrowers enrolled in autopay were already receiving a 0.25% reduction in their interest rates.

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