The reforms eliminate the SAVE repayment plan, reduce repayment options to two new plans, introduce new federal borrowing limits for graduate, professional, and Parent PLUS loans, and require millions of existing borrowers to transition to new repayment programs. The Department of Education says the changes are intended to simplify repayment and reduce higher education costs.
Student Loan Changes Starting July 1
Millions of Americans with federal student loans will see major changes beginning July 1 as the Trump administration introduces sweeping reforms to the student loan system. The changes affect repayment options and borrowing limits, and are expected to have a massive impact on current and future borrowers who rely on FAFSA to access federal financial aid.
The overhaul eliminates several existing repayment plans, including the Biden-era Saving on a Valuable Education (SAVE) program. Approximately 7 million borrowers enrolled in SAVE will have 90 days to switch to one of two remaining repayment options: the new Repayment Assistance Plan (RAP) or the Tiered Standard repayment plan.
Press release from the US Department of Education
While the Department of Education says the simplified system will make repayment a lot easier to understand, student loan advocates warn that many borrowers, particularly those with lower incomes, could face higher monthly payments. Research from the Institute for College Access & Success suggests that some households could see their monthly loan costs increase by hundreds of dollars.
The reforms also introduce new borrowing limits for graduate and professional students applying for federal aid through FAFSA. Graduate students pursuing master's degrees will now be limited to borrowing up to $20,500 per year and $100,000 over their lifetime. Students enrolled in professional programs like law or medical school will be able to borrow up to $50,000 annually, with a lifetime cap of $200,000. In most cases, total federal borrowing will not be allowed to exceed $257,500.
Parents using Parent PLUS loans will also face new restrictions, with a lifetime borrowing limit of $65,000 to help finance their children's education.
Supporters of the changes argue that limiting federal borrowing will encourage colleges and universities to reduce tuition costs. Department of Education officials say the new caps are designed to improve affordability and place downward pressure on the cost of higher education.
On the other hand, critics argue that the new limits could reduce access to graduate education, particularly for students attending high-cost programs. Some education policy experts believe the borrowing caps may force prospective students to reconsider or abandon plans to pursue advanced degrees.
The changes come after former President Joe Biden's student loan forgiveness initiative was struck down by the US Supreme Court in 2023, which ruled that the administration exceeded its authority under the HEROES Act.
(Source: Federal Student Aid)
Borrowers are encouraged to review their repayment options as soon as possible. The Department of Education also launched a repayment calculator on StudentAid.gov that allows borrowers to estimate their monthly payments under the new plans and compare available options before submitting an application.
