Millions of current and future student loan borrowers will see major changes beginning July 1 as a sweeping overhaul of the federal student loan system takes effect.
The changes, included in the One Big Beautiful Bill Act, impact repayment plans, borrowing limits and loan forgiveness programs. While some provisions affect only new borrowers, others could impact families planning to pay for college in the coming years.
One of the biggest changes affects Parent PLUS loans, which parents can use to help pay for a child’s college education.
According to Betsy Mayotte, president of the Institute of Student Loan Advisors (TISLA), parents were previously able to borrow up to the full cost of attendance.
Starting July 1, new Parent PLUS loans will be capped at $20,000 per dependent undergraduate student per year, with a lifetime borrowing limit of $65,000 per student.
Mayotte says the new limits could force some families to seek private student loans, which often don’t provide the same borrower protections as federal loans.
“That might mean having to go to private loans to finish paying for the degree. And if you can’t qualify for a private loan, you might not be able to complete your degree, which has me very, very worried,” Mayotte said.
The legislation also changes repayment options for new federal student loan borrowers.
For students who take out federal loans after July 1, the Repayment Assistance Plan (RAP) will become the only income-driven repayment plan available. Parent PLUS borrowers will not be eligible for RAP.
New borrowers will also have the option of a standard repayment plan with fixed monthly payments over terms ranging from 10 to 25 years, depending on the amount borrowed.
The changes also affect borrowers enrolled in the SAVE repayment plan, which is being phased out under the new law.
Mayotte says borrowers should take time to educate themselves about the new rules before choosing a repayment plan.
She recommends understanding the costs of each repayment option, both in the short and long term.
“When in doubt,” she says, borrowers should visit StudentAid.gov to review the latest information and compare repayment options.