“One Big Beautiful Bill Act” Federal Student Loan Updates

The President signed the bill on Friday, July 4, 2025, which made it law.

• Starting August 1, 2025, borrowers who are still enrolled in the SAVE IDR program will start to have interest accrue on their loans even though the loans will remain in forbearance.
  • Borrowers still have the option to pay, even though payments are not due, but the payments will not count towards the respective PSLF or IDR forgiveness programs.
  • Borrowers are encouraged to look at other available IDR repayment options like PAYE, ICR, and IBR
• Starting July 1, 2026, new borrowers repayment options will be limited and new borrowers will be subject to limits on the amount of federal student loans they can obtain.
  • If a borrower is still working on their program of study, they will not be impacted by the federal student loan limitations right away. They will have 3 academic years to complete their program of study before being subject to the new limits.
• Now until June 30, 2028, all borrowers will have the option to still be enrolled in their respective repayment plans, but they will need to start reviewing their options to change their repayment plans to IBR, Standard, or RAP.
• Now until June 30, 2027, all borrowers will still have the same payment postponement options for their federal student loans.
• Now until June 30, 2026, new borrowers who are looking for repayment options, will have all current repayment plans available.
• Starting July 1, 2026, and moving forward, new borrowers on or after this date will be able to switch between repayment plans, the new Standard and RAP plans.
• Starting July 1, 2028, and moving forward, if borrowers who are currently on the IBR plan want to switch plans, they will only have the new Standard and RAP as options. They will not be able to reapply for IBR at all.

• The bill will create a new Income-Driven Repayment Plan and adjust the current Standard Repayment Plan which will impact repayment options for borrowers and Parent PLUS borrowers with any loans disbursed after July 1, 2026. This will also end some of the current IDR plans, SAVE, PAYE, and ICR.
• After July 1, 2026, new borrowers and new Parent PLUS borrowers will be subject to the new federal student loan limitations.
• After July 1, 2027, borrowers and Parent PLUS borrowers who cannot afford to make their federal student loan payments will be limited on forbearance length and frequency. Some deferment options will no longer be an option.
• After July 1, 2027, federal student loans in default will have the opportunity to rehabilitate the loans 2 times.
• After July 1, 2028, RAP, Standard and IBR will be the only available repayment plans.

The two new repayment plans that will be available for borrowers who take out a new federal student loan on/after July 1, 2026 (aka “new borrowers”), including consolidation,  are the Standard Repayment Plan and the Repayment Assistance Plan (RAP). The Standard Repayment Plan uses the borrower’s loan balance to determine the length of repayment and payment amount.

The RAP uses the borrower’s loan balance, income, and family size to determine the monthly payment. The repayment term will be 360 months or 30 years, with the possible opportunity for forgiveness. The RAP plan is still an available plan for the PSLF program as well as the Standard 10-year Repayment Plan.

The new Standard Repayment Plan uses the borrower’s loan balance, and the repayment term will range from 10 years to 25 years. Below are some possible examples for how the repayment terms will be implemented:

• $25,000 or less with a repayment term of 10 years
• $25,000–$50,000 with a repayment term of 15 years
• $50,000–$100,000 with a repayment term of 20 years
• $100,000 or more with a repayment term of 25 years

The RAP plan will be based on a percentage of the borrower’s adjusted gross income. Adjusted gross income will be divided by 12, and then $50 will be subtracted from any dependents listed on the borrower’s tax return. If a dependent is not on the borrower’s tax return, then they will not be included in the RAP calculation. This means that if a borrower is married and files their taxes separately from their spouse, but the spouse claims the dependent on their tax return, the family size that will be used will be 2 instead of 3. Previously, with the other IDR plans, poverty level was considered with the calculation, and the family size wasn’t dependent on the tax return.

If the borrower recently consolidated their loans or has loans disbursed on/after July 1, 2026, they will only have the opportunity to apply for the two new repayment plans, Standard and RAP.

If the borrower is currently on an IDR plan or does not take out any new loans including consolidation, they will have the opportunity to apply for the IBR Plan from now until June 30,  2028. They will need to proactively apply for IBR.  If they do not apply for IBR by June 30, 2028 then they will be placed on the RAP plan starting July 1, 2028. Since consolidated Parent PLUS borrowers are currently only eligible for ICR, once IBR becomes available for enrollment they will need to apply for IBR since that will be their only IDR option.

• Elimination of Partial Financial Hardship Requirement, which means there will no longer be an income limit.
• Eligibility for consolidated Parent PLUS loans, excluding loans consolidated on/after July 1, 2026, ICR was previously the only eligible IDR plan.
• Repayment term will still be the same with the repayment term options being 20-25 years and the possibility of forgiveness.
  • 20-year repayment term requirement: First borrowed loans on or after July 1, 2014. Uses 10% of discretionary income to calculate monthly payment.
  • 25-year repayment term requirement: First borrowed loans prior to July 1, 2014. Uses 15% of discretionary income to calculate monthly payment.

Please note, some timelines for implementing the new changes are still uncertain. The Department of Education is expected to release further details. Please check studentaid.gov for the most up to date information.

Yes, it appears that will continue to be an option when the IDR application is filled out. It appears there will also be an opportunity to opt out of automatic recertification.

If the Parent PLUS loans are disbursed and/or consolidated on/after July 1, 2026, the only repayment option will be the new Standard Repayment Plan. If the parent is pursuing forgiveness under the Public Service Loan Forgiveness Program (PSLF), their only option to attempt forgiveness under that program is with the repayment term of 10 years. As a result, there is a likelihood that the loans would be paid off prior to or around the same time as PSLF forgiveness eligibility.

If the parent wants to pursue forgiveness under their respective PSLF or IDR programs, they will need to review the below options for those Parent PLUS loans and take the necessary steps to submit applications before June 30, 2026.

• The available IDR plan is currently ICR until the Department of Education implements the changes to the IBR program. DOE is expected to release further details but exactly when is not yet known.
• To be eligible for ICR, and in the future, IBR, the parent will have to consolidate the Parent PLUS loans, which will need to have a disbursement date prior to July 1, 2026.
  • If the disbursement date is on or after July 1, 2026, their only repayment option will be the new Standard Repayment Plan.

Starting July 1, 2027, economic hardship and unemployment deferments will no longer be available. There will still be a forbearance option, but it will be limited to 9 month increments during any 24-month (2 year) period. Federal loan servicers will still have the option to place borrowers in temporary forbearances throughout the life of the loans.

If during your medical or dental residency you are working for a qualifying nonprofit or public service hospital, you may still pursue PSLF after training. Time spent in residency and fellowship while working at a qualifying nonprofit or public service hospital, will also continue to count towards the required 120 monthly payments.

The qualifying payments do not need to be consecutive, but they will only count from October 1, 2007, forward.

No, the lowest possible monthly payment a borrower could have on the RAP would be $10. The monthly payment could be calculated to be more than $10 since this plan’s monthly payment calculations is based on income and family size.

Yes, if the monthly payment does not cover all interest due, then the remaining interest not paid by the borrower will not be owed.

Yes, for on time monthly payments that does not decrease the principal balance by at least $50, the government will pay the difference up to $50. Please see some examples below.

• Student 1’s monthly payment is $200. $170 of that payment goes to the outstanding interest and $30 of that payment goes to the principal balance. The government will pay $20 towards the principal balance.
• Student 2’s monthly payment is $100. All $100 of that payment will go towards the outstanding interest and none of it will go towards the principal balance. The government will pay $50 towards the principal balance.
• Student 3’s monthly payment is $400. $200 of that payment goes to the outstanding interest and $200 of that payment goes to the principal balance. The government will not apply any extra payments to the principal.

Had to adjust due to combining the interest and principal information from the bill in error. So adjusted the interest subsidy and then included question/answer for the matching principal aspect.

Starting July 1, 2026, Graduate or Professional PLUS loans will no longer be available. There will also be a total limit for federal Direct Unsubsidized Stafford Loans.

The law changed the total lifetime limit for undergraduate borrowers. Starting July 1, 2026, the undergraduate student will be subject to a $257,500 lifetime federal student loan limit.

• First year as an undergraduate student: The annual (yearly) federal student loan limit will be $9,500. Out of this total, $3,500 may be in subsidized federal student loans.
• Second year as an undergraduate student: The annual (yearly) federal student loan limit will be $10,500. Out of this total, $4,500 maybe be in subsidized federal student loans.
• Third year and beyond as an undergraduate student: The annual (yearly) federal student loan limit will be $12,500. Out of this total, $5,500 may be in subsidized federal student loans.
• The aggregate, maximum, federal student loan limit for an undergraduate is $57,500. Out of this total, $23,000 may be in subsidized loans.

The law changed the lifetime limit for graduate borrowers. Starting July 1, 2026, the graduate student will be subject to a $257,500 lifetime  federal student loan limit.

• First year and beyond as a graduate student: The annual (yearly) federal student loan limit will be $20,500.
• The aggregate, maximum, student loan limit for a graduate student is $100,000.

The law changed the lifetime limit for professional borrowers. Starting July 1, 2026, the professional student will be subject to a $257,500 lifetime federal student loan limit.

• First year and beyond as a professional student: The annual (yearly) federal student loan limit will be $50,000.
• The aggregate, maximum, student loan limit for a professional student: is $200,000.

• Parents will be allowed to borrow (Parent PLUS Loans): The annual (yearly) federal student loan limit, per student, will be $20,000.
• The aggregate, maximum, Parent PLUS Loans a parent will be allowed to borrow per student’s degree is $65,000.
• Both parents will not be allowed to borrow the same annual (yearly) or aggregate, maximum, federal student loan limit for the same student. Examples listed below:
  • Parent 1 borrows the limit of $65,000 for Susie to go to school. Parent 2 will not be able to borrow any money for Susie due to Parent 1 reaching the limit.
  • Parent 1 borrows the limit of $65,000 for Susie to go to school. Parent 2 can borrow another $65,000 for Susie’s brother Frank, to go to school.

Yes, starting July 1, 2026, a student may only borrow $257,500 in federal student loans during their lifetime. This limit does not include any Parent PLUS Loans or Direct PLUS Graduate Loans. Any amounts repaid, forgiven, discharged, or cancelled will be included in the overall lifetime limit for federal student loans.   Examples listed below:

• Student 1 went to school and paid $257,500 in 2015. Out of that total amount, $100,000 was Direct PLUS Graduate Loans. They want to go back to school and registered to start October 1, 2026. What is the amount student 1 may borrow for federal student loans?
  • Student 1 may borrow $100,000 due to the exception of Direct PLUS Graduate Loans listed in OBBBA.
• Student 2 went to school and took a break for a few years. They only borrowed $200,000 for their graduate program, and they are currently paying the loans off. None of the loans that were taken out for school were Direct Plus Graduate Loans. They are set to start back at school on January 1, 2030, for their doctorate (professional degree). What is the amount student 2 may borrow for federal student loans?
  • Student 2 may borrow $57,500 due to the overall limit listed in OBBBA.
  • Student 2 has since, paid back $10,000 of their student loans already. Can they now borrower $67,500?
    • No Student 2 will be limited to only borrowing $57,500, due to the overall limit listed in OBBA.

Yes, it appears the school type (i.e., undergrad, grad, etc.) and the student’s enrollment status (i.e., part or full time) will still be a part of the amount of student loans a student may borrow. If the student is less than full time, they will not be able to borrow the maximum amount of federal student loans. Examples of enrollment statuses are below.

• Enrolled Full Time
• Enrolled Half Time
• Enrolled Less Than Half Time

If a student is currently enrolled in their program of study and is borrowing federal student loans to help pay the higher education institution, the student will have up to 3 academic years to complete their program of study. If they do not complete their degree in that 3-year time frame, the student will be subject to the federal student loan limits that were implemented on July 1, 2026.

Starting on July 1, 2027, borrowers will have the chance to rehabilitate their federal student loans out of default at least 2 times per loan. If they default more than 2 times per loan, then the loan will remain in default until paid off or consolidated into brand new loans. The minimum payment to be made during the rehabilitation process will be $10. If the borrower decides to consolidate their federal student loans, if the loan is disbursed on/after July 1, 2026, their repayment plan options will be the new Standard and RAP.