New Student Loan Rules Explained: Impact on Borrowers

Changes to Federal Student Loan Repayment Plans

• 🎯 The Department of Education has scrapped most existing repayment plans, potentially causing payment spikes for nearly half a million borrowers.
• 💡 New borrowers, effective July 1, 2026, will have their options reduced from seven repayment plans to two: a standard plan and a new income-based repayment plan.
• ⚠️ Legacy borrowers will retain access to some current plans for a limited time, but the situation is complicated by staff reductions at the Department of Education.

Challenges for Current Borrowers

• 📌 Borrowers enrolled in the Biden-era SAVE plan are in legal limbo due to lawsuits, preventing them from making payments currently.
• 📈 Interest on these loans will begin accruing on August 1, and the new income-based repayment plan will not be available to them yet.
• 🔍 An older plan, Income-Based Repayment (IBR), is available and offers loan forgiveness after 20 or 25 years.

New Lifetime Borrowing Caps

• 💰 New lifetime borrowing caps have been imposed: $100,000 for graduate students and $200,000 for professional degree students (law, medicine).
• 👨‍👩‍👧‍👦 Parent borrowers will be limited to $65,000 per child.
• ⚖️ While most borrowers have previously stayed within these new limits, a subgroup may face difficult choices regarding their education and school selection.

Impact on Higher Education Costs

• ❓ It remains an open question whether these caps will help rein in the cost of higher education.
• 🎓 Previously, graduate students could borrow up to the cost of their program, leading some institutions to charge excessively high tuition, with taxpayers bearing much of the financial risk.
• 🤝 There is bipartisan support for curbing graduate-level spending, but it's uncertain if this will compel schools to lower prices.