Student Loan Options Change July 1: What Borrowers Need to Know

Major changes to federal student loans will take effect on July 1 under last year’s One Big Beautiful Bill Act, reshaping repayment options, borrowing limits and access to forgiveness programs for millions of borrowers. The end of the Biden-era SAVE plan is one of the biggest shifts. More than 7 million borrowers still enrolled in SAVE will be moved out of the program, and those who do not act may be placed into a less flexible repayment plan. The Education Department says borrowers will receive notices and likely have about 90 days to choose a new option.

Borrowers with existing federal loans issued before July 1 can still choose from several repayment plans. These include the Standard, Graduated and Extended plans, along with income-driven options such as Income-Based Repayment, Income-Contingent Repayment, Pay As You Earn, and the new Repayment Assistance Plan, or RAP. RAP is designed to base payments on adjusted gross income, offer interest relief and provide principal reduction for lower-income borrowers, but it requires 30 years of repayment before any remaining balance is forgiven. Another new option, the Tiered Standard Plan, sets repayment length based on balance size.

For borrowers who already have older loans but plan to take out new loans after July 1, choices narrow. Any new loan will be limited to RAP or the Tiered Standard Plan. The Tiered Standard Plan stretches repayment terms depending on how much is borrowed, with longer timelines for larger balances.

Undergraduate borrowing limits remain unchanged. Dependent undergraduates can still borrow up to $31,000 overall, while independent undergraduates can borrow up to $57,500, with annual limits varying by year in school.

Graduate borrowing rules change more sharply. Starting July 1, most graduate students will no longer be able to borrow up to the full cost of attendance. Instead, they will face annual and lifetime caps, with only certain professional degree programs exempted and allowed higher limits. Students already enrolled in some graduate programs may qualify for a temporary exception if they meet specific enrollment and borrowing conditions.

The bill also expands Pell Grants to short-term workforce training programs lasting eight to 15 weeks, opening federal aid to students pursuing credentials such as nursing assistant or welding training. Students must submit the FAFSA to qualify, though many programs may still need time to meet federal requirements.

Public Service Loan Forgiveness remains available, but new rules may affect some workers whose employers are deemed to have a “substantial illegal purpose.” Parent PLUS loans face new annual and total borrowing caps, and future Parent PLUS borrowers will lose access to income-driven repayment plans and certain forgiveness options.