Borrowers enrolled in the Biden-era SAVE repayment plan will also be required to transition to new repayment options over time. According to the Department of Education, the changes are intended to simplify repayment and curb excessive borrowing, though borrowers and policy experts say the impact could vary sharply depending on income and loan type.
More than 40 million Americans currently hold federal student loan debt, totaling nearly $1.7 trillion. The policy changes affect both existing borrowers and future students, with implications for monthly payments, repayment timelines, and access to graduate financing.
For many borrowers, the most immediate issue is understanding what changes now and what actions may be required in the months ahead. July 1 marks the start of implementation, not the final deadline for most repayment decisions.
Fewer Repayment Options and the End Of SAVE
One of the biggest changes is the elimination of the Saving on a Valuable Education (SAVE) plan, which currently affects around 7 million borrowers. According to Business Insider, the Department of Education will begin notifying SAVE borrowers in waves starting July 1, giving them 90 days from receiving notice to choose a new repayment plan.
Borrowers who do not select a new plan within that period will be automatically placed into a standard repayment plan, which generally results in higher monthly payments. The transition away from SAVE follows court rulings that blocked the Biden administration’s repayment framework.
The repayment system is also being simplified. New borrowers will now have only two main repayment options: a Standard Repayment Plan with fixed payments or the Repayment Assistance Plan (RAP), which serves as the primary income-based option.
According to ABC News, RAP payments will be calculated at roughly 1% to 10% of income, depending on earnings. Loan forgiveness under RAP is available only after 30 years of repayment. That is longer than many previous income-driven plans, which typically offered forgiveness after 20 to 25 years.
Existing borrowers are not required to switch immediately. Still, older repayment plans such as PAYE and ICR are being phased out through 2028, reducing long-term flexibility for many borrowers.
New Borrowing Caps Reshape Graduate and Parent Lending
The overhaul also introduces stricter limits on federal borrowing, particularly for graduate students and families using Parent PLUS loans. Graduate PLUS loans, which previously allowed students to borrow up to the full cost of attendance, will no longer be available to new borrowers beginning July 1. New caps now apply across several categories.
According to Newsweek, graduate students pursuing master’s degrees will be limited to $20,500 per year or $100,000 total in federal loans. Professional degree students, including those in law or medicine, may borrow up to $50,000 annually or $200,000 total. Parent PLUS loans are also being restricted, with a new annual limit of $20,000 and a lifetime cap of $65,000 per student.
Other changes affect Public Service Loan Forgiveness. New rules give Education Secretary Linda McMahon authority to disqualify certain employers if they are found to have a “substantial illegal purpose,” potentially affecting borrower eligibility for loan forgiveness.
Borrowers can also access a temporary autopay incentive. According to reports, eligible borrowers who enroll in automatic payments may receive a 1 percentage point interest rate reduction through June 30, 2028. The broader transition will continue through 2028 as older repayment systems are phased out and borrowers move into the new framework.
