The biggest overhaul of the federal student loan system in a generation takes effect on July 1, 2026. If you have federal student loans — or you’re planning to borrow for school this fall — these changes could affect how much you pay every month, which repayment plans you can use, and whether you qualify for loan forgiveness. Here’s a clear, plain-English breakdown of what’s changing and exactly what to do about it.
Starting July 1, 2026, the federal government is replacing most existing repayment plans with two new ones, ending the Biden-era SAVE plan, capping how much graduate students and parents can borrow, and reducing access to loan forgiveness for new borrowers. The changes come from the One Big Beautiful Bill Act (OBBBA), signed into law in July 2025.
The most urgent group: the roughly 7.5 million borrowers still on the SAVE plan, who will have about 90 days to choose a new plan — or get moved into one automatically that may cost more.
Why These Changes Are Happening
The federal student loan system currently runs on seven different repayment plans, and total student debt now sits at nearly $1.9 trillion. The OBBBA was designed to simplify that tangled system and slow the growth of student debt.
Whether you think that’s good policy or not, the practical reality is the same: the rules are changing, and borrowers who understand them early will be in a far better position than those who wait.
Change #1: The SAVE Plan Is Ending
The Saving on a Valuable Education (SAVE) plan — the most generous income-driven plan, which kept payments low for millions — is officially over.
If you’re one of the millions still enrolled in SAVE, here’s what to expect:
Your loan servicer will send you a notice starting around July 1, 2026.
That notice starts a roughly 90-day clock to pick a new repayment plan.
If you do nothing, you may be automatically enrolled in one of the least flexible repayment plans — which for some people means going from a $0 monthly payment to several hundred dollars overnight.
What to do: Don’t wait for the deadline. Log into StudentAid.gov, review your options, and choose a plan that fits your budget rather than letting your servicer pick for you.
Change #2: Two New Repayment Plans Launch
For loans taken out on or after July 1, 2026, borrowers will have only two repayment options:
1. The Repayment Assistance Plan (RAP)
This is the new income-driven plan. Key features:
Monthly payments are based on your adjusted gross income (roughly 1% to 10%, depending on your income bracket), with a minimum payment of about $10 per month.
Unpaid interest is waived each month, so your balance won’t balloon if you make on-time payments.
The remaining balance is forgiven after 30 years.
It qualifies for Public Service Loan Forgiveness (PSLF).
One catch: because RAP is based on your total adjusted gross income, some higher-income borrowers may end up paying more than they would have under older plans.
2. The Tiered Standard Repayment Plan
This plan replaces the old Standard, Graduated, and Extended plans with fixed payments. Your repayment term depends on how much you owe:
Loan Balance
Repayment Term
Lower balances
10 years
Mid-range balances
15–20 years
Higher balances
Up to 25 years
There’s a minimum payment of about $50 per month. This plan does not offer loan forgiveness, because you repay the full balance.
Change #3: Older Repayment Plans Are Being Phased Out
If you borrowed before July 1, 2026, and you don’t take out new loans, you keep access to your current options — for now. But two plans are closing:
PAYE (Pay As You Earn) and ICR (Income-Contingent Repayment) stop accepting new enrollees on July 1, 2026, and shut down completely by June 30, 2028.
If you’re on one of those now, you can stay for two more years — but once you leave, you can’t get back in.
The good news: Income-Based Repayment (IBR) survives. It remains permanently available for loans taken out before July 1, 2026, and the old income-eligibility restriction has been removed.
Change #4: New Borrowing Limits for Grad Students and Parents
If you’re heading to graduate school or borrowing as a parent, pay close attention:
Graduate students: Borrowing is capped at $20,500 per year ($100,000 lifetime) unless you’re in one of a handful of professional programs.
Professional degrees (medicine, law, dentistry, etc.): capped at $50,000 per year ($200,000 lifetime).
Grad PLUS loans are being eliminated for most new borrowers.
Parent PLUS loans: new annual limits of about $20,000 per child per year.
There’s also a critical deadline for Parent PLUS borrowers who want to keep income-driven repayment access: those loans generally need to be consolidated into a Direct Consolidation Loan before July 1, 2026. After that, unconsolidated Parent PLUS loans lose income-driven repayment access permanently.
A Small Piece of Good News: The Auto-Pay Discount
Beginning July 1, 2026, borrowers enrolled in auto-pay are eligible for a 1% interest rate reduction (up from the previous 0.25%). To benefit, you need to enroll in auto-pay by September 30, 2026. The reduction runs through June 30, 2028.
Setting up auto-pay is also one of the easiest ways to make sure you never miss a payment — which is a requirement for keeping benefits like PSLF on track.
What You Should Do Right Now
No matter your situation, here’s a simple action checklist:
Find out which plan you’re currently on. Log into StudentAid.gov.
Update your contact information with your loan servicer so you don’t miss critical notices.
If you’re on SAVE, start comparing new plans now — don’t wait for the 90-day clock.
Compare RAP vs. IBR if you’re an existing borrower. Run the numbers on both using the Federal Student Aid Loan Simulator.
If you’re a Parent PLUS borrower wanting income-driven repayment, act on consolidation immediately — this deadline is tight.
Enroll in auto-pay to lock in the 1% interest reduction.
Frequently Asked Questions
Do these changes affect my existing loans? If your loans were issued before July 1, 2026, and you don’t take out new loans, you keep access to most current repayment options. The main exceptions are PAYE and ICR, which end in 2028, and SAVE, which is ending now.
What happens if I’m on SAVE and do nothing? Your servicer will give you about 90 days to choose a new plan. If you don’t act, you may be automatically placed into a standard plan that could cost significantly more per month.
Is RAP cheaper than the old plans? It depends on your income. RAP can be affordable for lower-income borrowers and includes a monthly interest waiver. However, some higher-income borrowers may pay more than they did under previous income-driven plans.
Can I still get loan forgiveness? Yes. Public Service Loan Forgiveness (PSLF) is still available, and RAP forgives remaining balances after 30 years. Forgiveness is somewhat harder to access for new borrowers, but it hasn’t disappeared.
When do SAVE payments resume? Many SAVE borrowers can expect payments to resume by September or October 2026.
The Bottom Line
July 1, 2026, isn’t just another date on the calendar — it marks the start of a fundamentally different federal student loan system. The borrowers who come out ahead will be the ones who understand the new rules, choose their repayment plan deliberately, and meet the key deadlines instead of waiting for their servicer to decide for them.
Take a few minutes this week to log into StudentAid.gov, check your current plan, and map out your next move. A little attention now could save you hundreds of dollars a month down the road.
This article is for general informational purposes only and does not constitute financial, legal, or tax advice. Student loan rules are still being finalized and individual situations vary. Always confirm details with your loan servicer or a qualified financial professional before making decisions about your loans.
