If you're a federal student loan borrower or about to become one, your head may be spinning.
On July 4, when President Donald Trump signed the One Big Beautiful Bill Act into law, he also greenlit a history-making overhaul of the federal student loan system — one that will affect the lives of many, if not most, of the United States' nearly 43 million student loan borrowers.
And boy is it a lot to unpack, with new, tighter borrowing limits and dramatically reduced repayment options, to name just a few of the sweeping changes.
In May, we explained this overhaul, as conceived by House Republicans. Now that a Senate compromise has been signed into law, here's an updated guided tour of the final changes.
Let's start with the elephant in the room:
President Biden's SAVE plan is ending
The most generous repayment plan is the Biden-era Saving on a Valuable Education (SAVE) plan. But it is so generous, with its low monthly payments and expedited loan forgiveness, that Republicans have so far successfully argued in court that it is too generous. In fact, the nearly 7.7 million borrowers currently enrolled in SAVE have been in legal limbo for months, without interest accruing or required monthly payments.
That's about to change.
"For all practical purposes, I would say SAVE is just kind of dead at this point, even if it's technically on life support," said Preston Cooper at the conservative-leaning American Enterprise Institute (AEI).
This month, the U.S. Education Department announced that on Aug. 1, SAVE borrowers will, once again, see their balances grow — with interest. Because the SAVE plan is still enjoined, though, borrowers won't yet be required to make payments. Still, Cooper said that many borrowers, rather than watch their loans balloon, will likely want to move to a different plan.
Roxanne Garza, director of higher education policy at the liberal-leaning EdTrust, worries that the relatively last-minute announcement about interest accrual will cause problems for the Education Department, which saw roughly half its staff cut by the Trump administration.
"I think what will likely happen now is you will see a rush of people trying to take action that will, again, likely create an even bigger backlog," said Garza.
Under the One Big Beautiful Bill Act, borrowers in SAVE will have to change plans by July 1, 2028, when SAVE will be officially shut down. If they wait, though they currently can't be required to make payments, they will see their loans explode with interest.
But the two new plans that the law creates won't be ready for a year, and the department's own website, meant to help borrowers navigate their repayment options, does not reflect this confusing new landscape, except for a banner that says: "Loan Simulator will be updated at a later date to reflect recent legislative changes."
Beginning July 1, 2026, new loans will be subject to new borrowing limits
Undergraduates won't see any changes to their loan limits. But it's a very different story for graduate students and parents.
For graduate students, new limits will make it harder for lower- and middle-income borrowers to attend pricier graduate programs. The current grad PLUS loan allows students to borrow up to the cost of their graduate program, but Republicans are shutting it down this time next year.
After that, grad students' borrowing will be capped at $20,500 a year with a lifetime graduate school loan limit of $100,000, a big drop from the previous cap of $138,500.
How big a deal will this be? AEI's Cooper has been crunching the numbers and said, "Just under 20% of master's students borrow above the proposed limits."
Borrowers working toward a professional graduate degree (i.e., medical or law school) will have their borrowing capped at $50,000 a year and their lifetime cap increased from $138,500 to $200,000.
Parents and caregivers who use parent PLUS loans to help students pay for college will also see new loan limits. They will be capped at $20,000 a year and, in aggregate, at $65,000 per child.
Cooper says only one-third of parent PLUS borrowers with dependent children currently take out more than this new annual loan cap.
The law also sets a new lifetime limit, for undergrad and graduate loans combined, at $257,500 per person.
Repayment options for borrowers are changing dramatically
Republicans are reducing repayment options for new borrowers from the current seven plans down to two new plans. The new plans are:
1. The standard plan
New borrowers will be assigned a repayment window of between 10 and 25 years, depending on the size of their debt, with equal monthly payments like a home mortgage.
Under this plan, borrowers with larger debts would qualify for a longer repayment period:
- Owe less than $25,000, and repay over 10 years.
- Owe $25,000 or more but less than $50,000? Repayment expands to 15 years.
- Owe $50,000 or more but less than $100,000: Repay over 20 years.
- Anyone owing $100,000 or more would repay over a 25-year period.
2. The Repayment Assistance Plan (RAP)
For borrowers worried they don't earn enough to cover the inflexible monthly payments of the new standard plan, Republicans have also created the Repayment Assistance Plan (RAP).
On RAP, payments would largely be based on borrowers' total adjusted gross income (AGI).
- Borrowers earning no more than $10,000 would be asked to pay $10 a month.
- Earn more than $10,000 but not more than $20,000, and your payment will be based on 1% of AGI.
- More than $20,000 but not more than $30,000, it would be 2% of AGI and so on up the income scale.
- Repayment tops out at 10% of AGI for borrowers earning $100,000 a year or more.
Current borrowers will also have access to this new RAP plan, as well as to some older plans.
RAP is the latest in a long line of income-based repayment plans. How does it compare with previous plans?
Monthly payments for many middle-income borrowers on RAP will be lower compared with earlier plans, according to multiple experts. But RAP is not as generous as the Biden-era SAVE plan, which, again, is being phased out.
RAP will require even the lowest-income borrowers to make a minimum monthly payment of $10, ending the $0 option of previous plans and making it more expensive for these borrowers.
This new $10 minimum payment wouldn't make a big difference to the government's coffers, said Jason Delisle, who spoke to NPR in May, when he was studying student loan policy at the Urban Institute. Delisle has since been appointed to a position in the Trump administration.
Delisle said the purpose of RAP's new $10 minimum payment likely stems from "emerging research that requiring people to make some payment each month is good because it keeps them connected to the loan and makes it less likely that they'll default."
But some borrower advocates worry that this new minimum payment could have the opposite effect.
For the lowest-income borrowers, asking for $120 a year is "significant," EdTrust's Garza told NPR in May. "I think having that be a required minimum payment will likely push more borrowers into default."
But RAP also comes with a few new perks that borrowers will likely appreciate.
RAP will waive any interest that is left after a borrower makes their monthly payment.
If their monthly payment is $50 but they owe $75 a month in interest, the government will waive the remaining $25.
The result: Borrowers will no longer see their loans grow, which was a common downside to previous income-driven repayment plans.
Borrowers on RAP will also see their balances go down every month.
The government will pitch in up to $50 to make sure lower-income borrowers see their principal balances shrink.
For example, a borrower whose monthly payment makes only a $30 dent in their principal would see the government knocking off an extra $20 a month.
Borrowers whose monthly payments already reduce their principal balance by at least $50 would get no extra help from the government.
"It's a form of monthly loan forgiveness," Delisle said. "It's a drip, drip, drip of loan forgiveness, rather than waiting for the big payout at the end of 20 years."
The loan forgiveness math will change.
While previous plans offered forgiveness after 20 or 25 years, the RAP would extend that to 360 qualifying payments, or 30 years. That's a big difference, said AEI's Cooper.
Borrowers with typical levels of debt "and typical incomes for their degree level are almost always gonna pay off well before they hit that 30-year mark," Cooper said. "So if you're going into RAP, I wouldn't be thinking about forgiveness because you're probably gonna pay it off before you hit 30 years."
In short, the days of what Delisle called "the big payout" are over.
But wait! Current borrowers have another loan forgiveness option (sort of).
In addition to RAP, an older plan known as Income-Based Repayment (IBR) will still be available to borrowers who take out their loans before July 1, 2026.
Part of the reason IBR remains is that, unlike other income-driven repayment plans, IBR wasn't created by the Education Department. It was created by Congress and is codified in statute.
How does IBR work? For borrowers with loans older than July 2014, their payments are capped at 15% of discretionary income. Payments on younger loans are capped at 10%.
With the Biden-era SAVE plan being wound down, Delisle said, most lower- and middle-income borrowers would likely have lower monthly payments on the new RAP compared with IBR.
But, Delisle said, borrowers with older loans might still want to enroll in IBR if they've been in repayment for close to 20 or 25 years, so they can qualify for loan forgiveness.
That's because, on IBR, pre-2014 loans qualify for forgiveness after 25 years. For newer loans, it's just 20 years — both considerably shorter than RAP's 30-year schedule.
One big caveat to all this: The Education Department has temporarily stopped processing all loan forgiveness for borrowers on IBR because of the legal actions surrounding the SAVE plan, according to a statement from Education Department Deputy Press Secretary Ellen Keast.
Keast said the Biden-era rule explaining SAVE "provided the authority to count forbearances in IBR toward loan forgiveness" and, because that rule has been frozen by the courts, the department can't accurately determine loan forgiveness under IBR. "Discharges will resume as soon as the Department is able to establish the correct payment count," Keast said.
The department told NPR that any borrowers who make payments after they're eligible for forgiveness will eventually get a refund.
Edited by Nicole Cohen
Copyright 2025 NPR
