If you or your child are planning to borrow to help pay for college this fall, get ready for your student loan options to look a lot different.
President Donald Trump’s signature One Big Beautiful Bill Act, passed by Congress last year, made the most expansive changes to federal student loan borrowing and repayment in decades.
The changes, which go into effect on July 1, 2026, include fewer repayment options, different terms for many loans, and a restructuring of who is eligible for some post-graduate financing.
Borrowers who have already taken out loans and do not plan to consolidate them will be grandfathered into some legacy repayment plans, experts say. But new borrowers and people with existing loans who consolidate them or take out additional loans will be subject to the new rules.
“If you don’t understand it, that’s not your fault. It’s just phenomenally complicated,” said Winston Berkman-Breen, legal director at Protect Borrowers.
PBS News spoke to experts in higher education financing to help borrowers make sense of what’s changing and what you need to know.
Many repayment plans are sunsetting
Borrowers currently have access to about a half dozen plans for paying off their loans, including the standard 10-year plan, an extended 25-year plan, a graduated plan that increases payment amounts over time and a variety of income-driven repayment (IDR) plans, all of which are calculated differently.
For loans taken out after July 1 of this year, borrowers will only have two repayment plans to choose between: a new standard plan (which is different from the current standard plan) and one income-driven repayment plan. Parents who take out Parent PLUS loans will only have access to the standard plan and will not be eligible for Public Service Loan Forgiveness.
These new rules apply not only to new borrowers, but also to borrowers who consolidate their loans and those who have existing loans but take out more, experts warn.
Some experts believe streamlining the repayment options will lead to less confusion among borrowers. But Yolanda Watson Spiva, president of Complete College America, said that while it’s not beneficial to “proliferate programs for programs’ sake,” having an array of options makes sense for the wide variety of students today.
“They’re not a monolithic group,” Watson Spiva said. “We have so many different types of borrowers in different circumstances — independent borrowers, we have some that are dependent, so you have to take into account the parent — I mean, there’s so many nuances.”
“You cannot have a one-size-fits-all,” she added.
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Betsy Mayotte, founder of The Institute of Student Loan Advisors, suggests that families already on income-driven repayment plans for Parent PLUS loans should consider splitting up future loans between parents for additional college-bound children. If existing loans are in one parent’s name, have the other parent take out the new loans so “at least it doesn’t ‘infect’ the older loans,” she said.
Borrowers on the new standard repayment plan will pay a fixed monthly amount over one of four term lengths determined by the total borrowed.
- Less than $25,000: 10-year term
- $25,000 to less than $50,000: 15-year term
- $50,000 to less than $100,000: 20-year term
- $100,000 or more: 25-year term
Meanwhile, the new Repayment Assistance Plan (RAP) calculates minimum monthly payments based on adjusted gross income.
- For borrowers who earn less than $10,000, their minimum monthly payment is $10.
- Borrowers who earn between $10,000 and $20,000 must pay 1% of their income; that amount increases by one percentage point for every additional $10,000 a borrower earns, up to 10% for borrowers who make $100,000 or more.
- The monthly payment is lowered by $50 for each dependent claimed on a borrower’s tax return.
One major change Congress implemented with RAP is the elimination of what’s called negative amortization, or the possibility for loan balances to grow when interest accumulates faster than monthly payments can cover. In this case, the government will subsidize the remainder of the interest not covered by payments, and will pay up to $50 of the principal, for each monthly payment made on time.
But unlike other income-driven repayment plans, which may be forgiven after 20 or 25 years, RAP borrowers must make qualifying payments for 30 years before the loans can be forgiven.
The impact of the new plan will depend on the borrower’s specific financial circumstances. The Institute for College Access and Success found that a family of two adults with two children earning the median U.S. household income of $81,000 will pay $440 monthly for a loan on RAP, versus only $36 on the Saving on a Valuable Education (SAVE) plan. A single borrower with an income of $57,000 would pay $238 on RAP, versus $140 on SAVE.
Cooper’s analysis shows similar changes, but he also notes that SAVE is a highly subsidized plan — and is no longer available to borrowers as its future is litigated.
“Scheduled monthly payments under RAP are comparable to historical norms on IDR plans,” like Pay as You Earn (PAYE), Cooper writes. But borrowers who make higher incomes — around $100,000 and above — could end up paying hundreds more a month on RAP, because PAYE caps monthly payments.
Loans are capped at lower limits
Federal undergraduate loans taken out by students in their own names are not affected by new loan caps. But graduate and professional loans are, as are Parent PLUS loans.
Graduate PLUS loans, which allowed students to take out the full cost of tuition regardless of the amount, will no longer be available. Instead, post-graduate students will fall into one of two categories: graduate or professional.
Students pursuing graduate degrees will have new annual loan limits of $20,500 and lifetime limits of $100,000. Students of professional fields, such as aspiring doctors, lawyers, veterinarians and dentists, can borrow up to $50,000 annually and $200,000 total.
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“Nursing programs and public health programs are now considered not professional and so you can borrow half as much as you could for ‘professional’ programs like law or medicine,” Berkman-Breen said. “I think we’re going to see fewer people going into those essential other programs.”
Parent PLUS loans, meanwhile, are capped at $20,000 annually per student and $65,000 total per student.
According to government data, about 3.6 million people held Parent PLUS loans last year, totaling about $116 billion. That amounts to about 8% of total student loan holders and about 7% of the total loan debt.
“I think what’s most important to understand about this is that these new limits are going to affect a minority of students,” said Preston Cooper, a senior fellow who studies student loans and higher education at the American Enterprise Institute.
“It’s mostly people who are attending very expensive programs, very expensive colleges, very expensive institutions, who might see their ability to borrow from the federal government somewhat constrained by this. And I do think, to an extent, that is a feature, not a bug,” Cooper said. “The point is to put some downward pressure on tuition at some of the most expensive colleges out there, which are, quite frankly, probably overcharging students.”
Others say that instead of universities dropping rates, they expect students to find other ways to fund education. According to SoFi, a private lender, the average cost for a master’s degree in nursing ranges from $12,000 to $100,000 per year.
“What’s going to happen [is] individuals are going to go and seek private loans. Oftentimes, those are maybe more predatory or have higher interest rates, and they don’t qualify, for instance, for public service loan forgiveness,” Jennifer Mensik Kennedy, president of the American Nurses Association, told PBS News Hour.
Unemployment deferrals and forbearance rules are also changing
But not until 2027.
Borrowers can currently pause their repayment by requesting loan deferment, for specific qualifying circumstances like job loss, or loan forbearance, for more general financial struggles.
But loans taken out after July 1, 2027, will no longer be eligible for economic hardship or unemployment deferment.
For loan forbearance, the amount of time that borrowers can delay payment is shrinking. Current rules allow them to pause payments for up to a year at a time and up to three years total. After 2027, forbearance will be limited to only nine months within any two-year period.
Mayotte said that for the vast majority of borrowers, the Repayment Assistance Plan would be preferable to deferment, because interest continues to accrue on deferred loans.
“Somebody who’s in a situation where they qualify for economic hardship or unemployment deferment would probably end up with a $10 (monthly) payment on the RAP,” Mayotte said.
Every month an on-time payment is made, the government will cover the remainder of the interest and up to $50 of the principal.
“So they might be better off just doing the RAP anyway, especially because of the generous interest subsidy,” Mayotte said.