A major federal student loan overhaul goes into effect on Wednesday, July 1, 2026, changing how millions of Americans borrow and repay college debt through fewer repayment choices, tighter borrowing caps and a shift away from broad cancellation toward mandatory repayment.

SAVE Borrowers Face New Repayment Deadline

Enacted under President Donald Trump’s One Big Beautiful Bill Act, the new rules permanently eliminate several popular repayment programs, impose strict caps on new borrowing and move the federal student aid system toward a narrower set of repayment options.

Whether borrowers already carry federal student debt or plan to take out loans for future education, the changes could affect monthly payments, total borrowing power and access to older repayment benefits.

The biggest immediate change hits borrowers enrolled in the Biden-era Saving on a Valuable Education plan, or SAVE. The program has effectively ended after a court fight and the Trump administration’s decision to wind it down. More than 7 million borrowers are expected to transition out of the plan.

Loan servicers are expected to begin notifying SAVE borrowers around July 1. Once contacted, borrowers generally get 90 days to choose a new repayment plan. Those who do nothing will be automatically moved to a standard repayment plan, which could result in higher monthly bills.

Older income-driven repayment plans are also being phased out. ‘Pay As You Earn’ and ‘Income-Contingent Repayment’ will disappear by July 1, 2028. Existing borrowers with older loans who do not take out new federal debt can still remain in some older plans, including Income-Based Repayment.

New Borrowers Get Fewer Payment Choices

For new borrowers, the menu is now much smaller. Anyone who takes out a new federal loan after July 1 generally has two choices — the Repayment Assistance Plan, known as RAP, or the Tiered Standard Repayment Plan.

RAP bases payments on income and family size while limiting runaway interest for borrowers who make full, on-time payments. The Tiered Standard plan uses fixed repayment terms of 10, 15, 20 or 25 years, depending on the borrower’s balance.

The law also tightens federal borrowing limits. Parent PLUS loans are capped at $20,000 a year and $65,000 per student. Graduate students can borrow up to $20,500 annually and $100,000 total. Professional students can borrow up to $50,000 a year and $200,000 total. Most borrowers who take new loans face a lifetime federal loan cap of $257,500.

Those caps have already triggered lawsuits and criticism from states and health care groups, especially over limits affecting some advanced health care degrees.

Borrowers Must Act Before Deadlines Hit

The Education Department is offering one short-term sweetener. Borrowers enrolled in automatic payments can receive a 1% interest rate discount, up from the previous 0.25% benefit. Borrowers must enroll through their servicer by Sept. 30, 2026, and the discount lasts through June 30, 2028.

Borrowers should log in to StudentAid.gov, confirm their contact information, check their loan type and repayment plan, compare RAP, IBR and standard options, and contact their servicer before their 90-day window closes.

Future students should also speak with financial aid offices before borrowing, because one new loan can pull older debt into the new repayment system.

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