A popular (and generous) repayment plan ends, two new plans begin and many borrowers will see new loan limits.
On July 1, a host of new student loan changes from last year's One Big Beautiful Bill Act will kick in, including the end of a short-lived Biden-era repayment plan, the start of two Republican-designed repayment plans and strict new borrowing limits for some students.
There's a lot to parse, and not every change will impact every borrower. So we've designed this story to make it easy to find the guidance thatYou're a current borrower with old loans and no plans for new loansYou're in graduate school right now. Do the new loan limits apply to you?from the U.S. Department of Education warning you that you'll have to switch plans soon.
Well, you'll likely be getting another note from your loan servicer, starting a roughly 90-day clock. If you don't act, the department says it will enroll you in one of the least flexible repayment plans. – especially considering that many borrowers enrolled in SAVE precisely because their low incomes qualified them for a $0 monthly payment.
Whoever you are, whatever your story, whether you enrolled in the SAVE plan or not, you're in good company: About 43 million Americans hold about $1.7 trillion in federal student loan debt. As long as your loans were issued before July 1, and you have no plans to borrow any more money, you'll have quite a few repayment options, including one brand new plan.
They are:This plan divides your loan balance into equal monthly payments over a 10-year period. If your loans have beenMonthly payments start out low, but as the name suggests, they increase every two years and are spread out over a 10-year period.
As with the Standard plan, borrowers with consolidated loans may qualify for a longer repayment term.allows borrowers to start small, and, ideally, as your payments increase over time, so too does your income and your ability to keep up with them.graduated, but there's one big difference. Payments can last up to 25 years, instead of the common 10 years.
How it works: If your loans are older than July 1, 2014, your monthly payments are based on 15% of your discretionary income and spread over a 25-year period. Anything left after that is forgiven. For loans taken out after July 1, 2014, monthly payments will be based on 10% of discretionary income and spread over 20 years before the remainder is forgiven. ICR bases monthly payments on a larger share of a borrower's discretionary income — 20%.
Borrowers also have to make payments over a relatively long period of time — 25 years — before they can qualify for forgiveness. This is arguably the least generous member of this plan family. It's also being phased out by 2028, so, if you do enroll, you'll have to change plans again in two years.
PAYE's terms are similar to what newer IBR borrowers enjoy: Payments are based on 10% of discretionary income over a 20-year period, then the remainder is forgiven. Like ICR, Republicans voted to shut down PAYE by July 1, 2028; so you'll need to switch plans again within two years. RAP bases monthly payments on a borrower's adjusted-gross income . The more you make, the higher your monthly payment.
For example, a borrower earning $30,001-$40,000 can expect a monthly payment around $75-$100. Earn $50,001-$60,000 and it jumps to $208.34-$250. that makes sure lower-income borrowers see their loan principals go down each month. And, for parents and caregivers, it allows you to slash $50 from your monthly payment for every dependent in your household. Unlike IBR, ICR and PAYE, RAP requires that borrowers be in repayment for 30 years before any remainder is forgiven.
By then, there'll be little if any debt left. And, a nerdy but important facet: This plan isn't indexed for inflation, which means modest income gains could trigger big increases in monthly payments. So, you've already got some loans, and you're planning to take out more. The good news/bad news is you won't have a lot of repayment options to choose from.
Any borrower who takes out a loan on or after July 1 will be limited to the two new repayment plans created in the One Big Beautiful Bill Act:, the new Tiered plan divides a borrower's principal and interest into equal monthly payments over a set period. Again, predictable as the sunrise. What's different is that that period of time grows with the size of the debt. Hello, fresh face!
Welcome to your higher education adventure. Let's be honest, you're probably not thinking much about your repayment options yet. You're headed to school, and we wish you well. As you get on your way, here are a few things to keep in mind: Lending limits haven't changed for undergraduate borrowers.
Dependent/independent undergrads are stillIn total, dependent/independent undergrads can borrow up to $31,000/$57,500. Many of you probably have undergraduate loan debt, though hopefully not too much. And for the moment, you're probably not thinking about repayment since you're headed back to school. We wish you well!
Still, there are a few things to keep in mind: As of July 1, lending limits change dramatically. Until now, grad students could borrow up to the cost of their program. Your program costs $40,000 a year? You could borrow $40,000 every year.
Soon, though, you'll be limited to $20,500 a year and a total of $100,000. That's a big difference. Only a small group of so-called"professional" degrees will be exempted from these lower limits and qualify instead for $50,000 a year in loans, or $200,000 in all. These degrees fall into 11 categories: chiropractic, clinical psychology, dentistry, law, medicine, optometry, osteopathic medicine, pharmacy, podiatry, theology and veterinary medicine.
This is complicated. The Education Department is making some exceptions for grad school borrowers who are in the middle of their higher education adventures.
You may be exempted from the new loan limits if:By then, you also have to have received a loan for your program.the department's website says you can lean on the old loan limits — i.e., borrow up to the cost of your program — for either three academic years or the difference between how long your program is supposed to last and how long you've already been enrolled, whichever number is smaller. One of the biggest changes going into effect on July 1 is an expansion of the traditional Pell Grant for low-income students to include what's known as short-term workforce training.
A Pell Grant is essentially free money from the federal government – unlike a loan, it does not need to be paid back. For 2026-27, the largest grant a student in a traditional program can qualify for is This expansion of Pell is meant to help workers learn new skills to become, say, a certified nursing assistant or a welder.
For the first time, students will be able to get federal help paying for these training programs, which last between eight and 15 weeks. One huge caveat: This expansion is so new that many current training programs may not qualify. And because it comes with some pretty It will take states and the federal government some time to figure it all out, so you'll need to be patient. And while you wait, fill out the FAFSA!
The good news for you is that the program known as Public Service Loan Forgiveness still exists. It's a policy quid pro quo: If you pledge to work full-time in public service — as a nurse or police officer or school teacher, etc. — for 10 years while making 120 monthly payments toward your student loans through a qualifying repayment plan, then whatever debt is left will be forgiven by the U.S. government.to see which plan makes the most sense for you, i.e., which plan has you paying the least over the next decade.
The other question you may have is: Wait! Didn't I see stories about how the Trump administration is changing the PSLF rules, maybe making it harder to qualify? Effective July 1, the department says it can deny loan forgiveness to workers whose government or nonprofit employers engage in activities with a"substantial illegal purpose.
" The job of defining"substantial illegal purpose" belongs to the education secretary. Last year, the department offered this short list:"terrorism, child trafficking, and transgender procedures that are doing irreversible harm to children.
", worried that the administration might try to use a city government's politics to exclude its public workers from PSLF. The fight over this rule is very much still playing out, so stay tuned. The Parent PLUS program will see a few key changes take effect July 1. Here's what to know: First of all, there will be new limits on how much parents can borrow.
Parent PLUS loans will be capped at $20,000 per year,, with an aggregate cap of $65,000 per dependent. That's a big change from the previous rules which allowed PLUS loans up to the cost of a program. Repayment is also seeing big changes. Parent PLUS borrowers who take out a loan after July 1 will no longer qualify for any plan that bases their monthly payment on their income.
They will only be able to use the newFor Parent PLUS loans that were taken out before July 1, borrowers' best bet for a long-term, income-driven plan is, will be phased out in 2028) then switch to IBR. If this is news to you, it may already be too late. Therecommends borrowers start this process at least three months early to make sure their new consolidated loans are issued before the July 1 deadline.
Cory Turner reports and edits for the NPR Ed team. He's helped lead several of the team's signature reporting projects, including"The Truth About America's Graduation Rate" , the groundbreaking"School Money" series ,"Raising Kings: A Year Of Love And Struggle At Ron Brown College Prep" , and the NPR Life Kit parenting podcast with Sesame Workshop .
His year-long investigation with NPR's Chris Arnold,"The Trouble With TEACH Grants" , led the U.S. Department of Education to change the rules of a troubled federal grant program that had unfairly hurt thousands of teachers. KPBS keeps you informed with local stories you need to know about — with no paywall. Our news is free for everyone because people like you help fund it.
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