As with many things in the federal government these days under President Trump’s second administration, there are big changes in student loan programs.
On July 4, 2025, the so called One Big Beautiful Bill Act, or OBBBA, was signed into law, resulting in changes to federal student aid programs. Some of these changes went into effect immediately, while others will go into effect in 2026 and beyond.
On May 1, 2026, the U.S. Department of Education published a final rule concerning most of the loan-related provisions in the OBBBA.
These changes will take effect on July 1, 2026, for new loans, but existing borrowers will have a more gradual transition period or retain access to some current options. Here’s a summary from the College of New Jersey at how and when student loans will change and what you can do now to prepare:
What this means for current borrowers
This change may or may not affect you, depending on what plan you’re on:
- If you’re on the Pay As You Earn plan, or PAYE, Income-Contingent Repayment plan, or ICR, or the now-defunct SAVE plan: You’ll need to switch to the Income-Based Repayment plan, or IBR, or the Repayment Assistance Plan, or RAP, by July 1, 2028. If you don’t switch, your loan servicer will auto-enroll you in one of those plans.
- If you’re on IBR: You can stay on IBR or change to RAP after July 1, 2026.
Parent borrowers
Parent PLUS loans won’t be eligible for the new Repayment Assistance Plan. Currently, the only income-driven plan available to Parent PLUS borrowers is Income-Contingent Repayment – and only if you consolidate your loans first.
If you want to access an income-driven plan moving forward, you’ll need to consolidate your Parent PLUS loans before July 1, 2026, and enroll in a qualifying income-driven repayment plan or IDR plan.
3. The SAVE plan has been shut down
The SAVE plan has been blocked in the courts for a while now, but it was dealt its final blow in late 2025 when the Trump administration announced a proposed settlement with the state of Missouri.
If approved, this settlement will end the plan sooner than its initial expiration date in 2028. The Department of Education will no longer enroll new borrowers in SAVE and will begin transitioning SAVE borrowers into alternative plans.
If your loans have been on pause due to the SAVE plan litigation, it’s time to explore your other repayment options. The Federal Student Aid Loan Simulator tool can help you compare costs on alternative plans.
4. Federal borrowing limits are tightening
Starting on July 1, 2026, the borrowing limits for certain federal student loan types will change. The new rules will be:
- Graduate students: Up to $20,500 per year with a lifetime limit of $100,000 in Direct Unsubsidized Loans.
- Professional students: Up to $50,000 per year with a lifetime limit of $200,000 in Direct Unsubsidized Loans
- Parent borrowers: .Up to $20,000 per year per student, with a lifetime limit of $65,000 in Parent PLUS loans.
The borrowing limits for Direct Subsidized and Unsubsidized Loans for undergraduate students will mostly remain unchanged. However, part-time students will see their borrowing limits reduced based on their enrollment status.
What this means for current borrowers
If you already have student loans, you’ll have access to the previous borrowing limits for three years or until you’ve finished your program. That means graduate and professional students can still borrow up to $20,500 per year with an aggregate limit of $138,500.
Parent borrowers can also keep borrowing under the old rules – up to their child’s cost of attendance, minus any other financial aid received – for three years or until the student finishes their program.
5. Grad PLUS loans are being eliminated
The OBBBA has also eliminated the Grad PLUS loan program after July 1, 2026. These loans allowed graduate and professional students to borrow up to their school’s cost of attendance with a minimal credit check. It will no longer be a financing option for graduate and professional students looking to borrow for the first time after that date.
If your federal financial aid package doesn’t cover your full cost of attendance, you may consider other financing options, such as scholarships, grants, savings, work-study, income from a part-time job, or private student loans.
What this means for current borrowers
If you already have a Grad PLUS loan, you can continue to borrow Grad PLUS loans for three years or until you’ve finished your program.
6. Parent loans will no longer qualify for Public Service Loan Forgiveness
The Public Service Loan Forgiveness, or PSLF, program forgives federal student loans for eligible public servants after 10 years of service. It also requires that you make 120 payments on an income-driven repayment plan while working for a qualifying nonprofit or government employer.
However, Parent PLUS loans issued on or after July 1, 2026 won’t be eligible for the RAP, the sole income-driven option for loans disbursed after that date. As of now, parents who borrow Parent PLUS loans in the future won’t have a pathway to Public Service Loan Forgiveness.
What this means for current borrowers
If you already have Parent PLUS loans and are working toward PSLF, you should be able to get on the Income-Based Repayment plan as long as you switch before July 1, 2028. And if you’re not on IDR yet, you’ll need to consolidate your Parent PLUS loans before July 1, 2026, and apply for a plan.
7. Deferment and forbearance options will be more limited
New federal student loans will no longer be eligible for economic hardship or unemployment deferments, which let you pause payments when you couldn’t afford them. This applies to loans issued on or after July 1, 2027, a year later than most of the other changes.
Forbearance will also be limited to a maximum period of nine months during a two-year period. Currently, forbearance lets you pause payments for up to 12 months at a time.
8. Student loan forgiveness could become taxable again
The American Rescue Act of 2021 exempted student loan forgiveness from federal taxation through the end of 2025. This exemption is unlikely to be extended, so borrowers who receive forgiveness in 2026 or after may have to pay taxes on the forgiven amount.
This largely applies to forgiveness from an income-driven repayment plan. You don’t have to pay federal taxes on loan cancellation from Public Service Loan Forgiveness.
How to prepare for the upcoming student loan changes
There are a lot of changes coming for federal student loans in 2026, but they affect new borrowers and existing borrowers differently. Either way, here are some steps you can take to prepare:
- Review your current repayment plan: If you’re already in repayment, find out what plan you’re on. That way, you’ll know if you have to change repayment plans ahead of the 2028 deadline.
- Compare future repayment options: Your choices will depend on whether your loans were issued before or after July 1, 2026. It’s worth choosing a plan yourself; letting your servicer pick one for you may not be cost-effective or align with your financial goals.
- Write down key deadlines: There are a lot of dates to keep track of, so write down any deadlines that may apply to your loans.
- Plan for tighter borrowing limits: If you’re planning on graduate or professional school next year, consider how you’ll cover costs if your federal financial aid falls short.
- Assess your strategy as a parent borrower: Parent borrowers may have to act quickly if they want to access income-driven plans or become eligible for PSLF.
- Consider tax implications: If you’ll be receiving loan discharge from an income-driven plan in 2026 or after, prepare yourself for a potential tax bill on the amount.
- Update your contact information: Make sure your loan servicer has your most up-to-date details so you don’t miss any important communications about transitioning plans and deadlines.
Final thoughts
Be aware that 2026 is bringing a major restructuring to the federal student loan system. The best ways you can prepare are staying informed about the changes and making proactive choices before any deadlines arrive.
