New student loan rules take effect July 1. Here’s what borrowers should know.

The federal student loan landscape is undergoing significant changes with the implementation of new rules effective July 1. These changes, part of the 2025 “One Big Beautiful Bill Act,” will impact millions of Americans who rely on student loans to fund their education. The aim of these reforms is to simplify the student loan system, which currently offers seven repayment plans, and address the nearly $1.9 trillion student loan debt burden in the country.

One of the major changes set to take place is the introduction of stricter borrowing limits. For instance, under the Parent PLUS loan program, parents will now be capped at borrowing $20,000 per year and $65,000 total per student, a departure from the previous practice of allowing parents to borrow the full cost of attending school. Graduate students and those pursuing professional degrees will also face new limits, with caps set at $20,500 per year and $100,000 for the degree, respectively.

Furthermore, the overhaul includes a lifetime loan cap of $257,500 for new borrowers, affecting various fields such as pharmacy, law, and medicine. While these changes have sparked concerns from some professions excluded from the professional designation, the Department of Education has assured that the majority of nursing students will not be impacted by the new borrowing cap.

In terms of repayment options, new federal student loan borrowers will be limited to two plans: the Tiered Standard Plan and the Repayment Assistance Plan (RAP). Existing borrowers who do not take out new loans after July 1 can continue to access the current repayment options, such as the Standard Repayment Plan, Extended Repayment Plan, and Income-Based Repayment (IBR), among others. However, the PAYE and ICR plans will be phased out, requiring borrowers enrolled in these programs to switch to another repayment plan by July 1, 2028.

Additionally, the changes also affect the Pell Grant program, with tighter eligibility requirements and the closure of loopholes that previously allowed students with high assets to receive grants. The reforms expand Pell Grant eligibility to students enrolled in shorter-term workforce training programs, opening up opportunities in fields like nursing assistance and automotive mechanics.

As these changes come into effect, borrowers are advised to stay informed and communicate with their loan servicers to navigate the transition smoothly. By understanding the new rules and exploring the available repayment options, borrowers can make informed decisions to manage their student loan debt effectively.