New student loan rules come into effect in July
Americans with federal student loans could be affected by some changes coming next month. A new analysis also reveals that 3.5 million Americans will lose food stamps and SNAP benefits under President Trump’s “One, Big, Beautiful Bill.”
Fox – Seattle
Federal student loan rules are set to change on July 1, and waiting borrowers may have fewer repayment options than they currently have. This change affects both repayment plans and some loan programs, including Parent PLUS and graduate borrowing.
Some existing plans will close to new borrowers, some will be phased out over time, and SAVE plan borrowers may be automatically transferred if they don’t choose a new option, according to federal announcements and student loan experts.. Borrowers who do not select a new plan within 90 days provided by their loan servicer will be automatically enrolled in either the standard repayment plan or the new tiered standard plan, the Department of Education said.
As Medora Lee recently wrote, the important question for borrowers is not the specifics of the policy, but what action to take now. This includes finding out which repayment plan you’re on, whether your loan was paid before or after July 1, and whether you need to consolidate your Parent PLUS loan by the deadline. The main place to check your options is studentaid.gov.
1. Check your repayment plan now
Experts say you should review your federal student loan accounts by July 1 because multiple repayment options will change at once. The most immediate step you can take is to log into studentaid.gov and see which plan you’re in and what options are still available to you.
Jack Wallace, director of government and loan relations at Illefee, said borrowers may be able to take advantage of things now that may not be available in the future. Waiting can limit the options available to you.
2. If you’re on SAVE, don’t think you can stay there
Borrowers still enrolled in the now-defunct “Saving on a Valuable Education” plan will be contacted by their loan servicer around July 1 and given a 90-day grace period to transition to the new payment plan, according to a Department of Education announcement linked in the note. Approximately 7.5 million borrowers were enrolled in SAVE.
Many SAVE borrowers have put their repayments on hold. Bright Horizons’ Stacey McFettle said that because standard plans can have higher monthly payments, borrowers are strongly encouraged to consider and apply for other income-based plans before the automatic deadline. More information is available at ed.gov.
If you are seeking public service loan forgiveness or income-based forgiveness, payments made while remaining in SAVE will not count toward your progress, McFettle said. He said existing borrowers can switch to IBR if they qualify.
3. Parent Plus borrowers may be required to consolidate before July 1st.
For parents with Parent PLUS loans, the biggest action is consolidation. Borrowers must consolidate these loans into a Direct Consolidation Loan by July 1 to remain eligible for programs such as income-driven repayment options and public service loan forgiveness.
Parents who do not integrate by then will permanently lose access to income-driven repayment plans and PSLF. Instead, you’ll be limited to a standard repayment plan, which can result in higher monthly bills.
4. Some repayment plans have been terminated or phased out
Some existing repayment plans are limited. PAYE and ICR will no longer be available for loans taken out after July 1, and both plans will be completely phased out by July 1, 2028, with borrowers in these plans having until June 30, 2028 to choose a new repayment option. Existing borrowers with old loans may still keep them for now.
IBR is also changing. Existing IBR plans will be discontinued for loans disbursed before July, but the plan will close applications to new enrollees on July 1st. If you think one of these plans fits your situation, the practical step is to check whether you qualify for a loan before closing.
5. New borrowers have fewer repayment options
Starting July 1, only two repayment plans will be available to new borrowers: the Standard Repayment Plan and the new Repayment Assistance Plan (RAP).
Standard plans offer fixed monthly payments for 10 to 30 years, depending on the loan. Monthly payments can be higher, but the total interest typically reduces over time, according to the Department of Education. RAP is described in the note as an income-driven plan with payments ranging from 1% to 10% of adjusted gross income, or $10 per month for borrowers earning less than $10,000 a year, and is forgiven after 30 years of repayment, although actual payments vary by income band and can also be adjusted based on dependents.
6. PLUS loan limits for graduates and parents will also change
Borrowers planning to take out new loans for graduate school or a dependent’s education may also want to check the timing. After July 1, Graduate PLUS loans will no longer be offered, but some existing borrowers may continue under the old limits for up to three academic years if they have made at least one payment by that date.
New Direct Unsubsidized Graduate Loans are capped at $20,500 per year, with a total cap of $100,000 for standard graduate programs, and $50,000 per year, with a total cap of $200,000 for certain specialized programs. Parent PLUS loans are capped at $20,000 per student per year, with a lifetime limit of $65,000 per dependent unless the borrower becomes a grandparent under the old rules.
If you plan to borrow under the current rules, it may be important that your application is approved and the first disbursement occurs before July 1, but what ultimately determines eligibility under the old rules is whether the loan is actually disbursed before July 1, 2026.
This story was created with the help of artificial intelligence (AI). Journalists were involved in every step of the information gathering, review, editing, and publication process. learn more.
