The changes reshape several long-standing federal student loan programs and require immediate action from borrowers enrolled in the Biden-era SAVE repayment plan. According to the U.S. Department of Education, the reforms are intended to simplify repayment options and curb excessive borrowing.
The United States has nearly 43 million people holding approximately $1.7 trillion in federal student loan debt, according to reports. For many of them, the coming months will determine how their future payments are calculated and which repayment program they will use.
SAVE Borrowers Must Select a New Repayment Plan within 90 Days
One of the most immediate changes is the end of the Saving on a Valuable Education (SAVE) repayment plan. The program, introduced during the Biden administration, was ruled unconstitutional by a federal court in March. Loan payments for SAVE participants had already been paused since July 2024 during the legal proceedings.
According to TIME, more than 7 million borrowers enrolled in SAVE will begin receiving notices from their federal loan servicers requiring them to choose a different repayment plan within 90 days. Borrowers may select either the new Repayment Assistance Plan (RAP) or the Tiered Standard Repayment Plan.
The Tiered Standard Plan establishes repayment periods based on the total amount borrowed, ranging from 10 years for loans below $25,000 to 25 years for balances of $100,000 or more. The RAP plan ties monthly payments to a borrower’s income, generally between 1% and 10%, with a minimum monthly payment of $10. Borrowers enrolled in RAP may also reduce their monthly payment by $50 for each dependent in their household, while loan forgiveness is available after 30 years.
Betsy Mayotte, president and founder of the Institute of Student Loan Advisors, urged borrowers not to panic but to understand the available options. According to Scripps News, she said borrowers should evaluate which repayment plan best fits both their short-term budget and long-term financial goals.
Graduate, Professional and Parent Borrowers Face New Federal Loan Caps
The legislation also introduces lower borrowing limits for many students taking out new federal loans after July 1. Graduate students are now limited to borrowing $20,500 per year and no more than $100,000 over their lifetime. Professional students, including those enrolled in law or medical programs, may borrow up to $50,000 annually with a lifetime limit of $200,000.
Parent PLUS loans have also been revised. According to CBS News, parents financing an undergraduate student’s education may now borrow up to $20,000 annually, with a lifetime limit of $65,000 per student. Previously, Parent PLUS loans generally allowed borrowing up to the full cost of attendance.
The legislation also establishes a lifetime federal student loan limit of $257,500 for most borrowers receiving loans on or after July 1. Existing borrowers are generally grandfathered under previous borrowing limits for up to three academic years or until they complete their current program.
The Department of Education said the revised borrowing caps are intended to curb excessive borrowing and encourage colleges and universities to evaluate their costs. Borrowers seeking additional guidance can compare repayment options and estimate monthly payments through the federal resources available at StudentAid.gov.
