A major student loan overhaul takes effect July 1. Here’s what borrowers need to know.

The student loan landscape is undergoing significant changes starting July 1, with new limits on borrowing and repayment options. These changes are a result of the One Big Beautiful Bill Act signed into law by President Trump last year. The aim is to streamline the student loan system, which currently consists of seven repayment plans, and tackle the nearly $1.9 trillion student loan debt crisis.

According to Sarah Austin, a policy analyst at the National Association of Student Financial Aid Administrators, these changes mark the most significant overhaul in a long time. Borrowers enrolled in the Biden-era Saving on a Valuable Education (SAVE) plan will also face transitions as the program is phased out, and they are shifted into new repayment options.

For borrowers navigating these changes, it is crucial to stay informed and communicate with loan servicers. Financial aid offices can also provide guidance, and online calculators like the Education Debt Consumer Assistance Program’s Repayment Plan Calculator can help determine the best repayment option.

Here’s a breakdown of the key changes coming into effect on July 1:

### New Limits on Student Borrowing
– Parent PLUS loans will be capped at $20,000 per year and $65,000 total per student.
– Graduate students can borrow up to $20,500 per year, with a cap of $100,000 for their degree.
– Professional degree students, including those in pharmacy, law, and medicine, are restricted to $50,000 per year and $200,000 total.
– New borrowers will have a lifetime loan cap of $257,500.

### Repayment Options Are Shrinking
– New federal student loan borrowers will have two repayment options: the Tiered Standard Plan and the Repayment Assistance Plan (RAP).
– Current borrowers who don’t take out new loans after July 1 can continue with existing repayment plans.
– The PAYE and ICR plans are being phased out, and borrowers enrolled in those programs must switch to another plan by July 1, 2028.

### SAVE Borrowers Face a Separate Transition
– Borrowers enrolled in the SAVE plan must choose a new repayment option before the program sunsets in July 2028.
– Loan servicers will notify SAVE borrowers to select a new plan within 90 days.
– Pell Grant eligibility requirements are being tightened, closing loopholes and expanding funding for shorter-term workforce training programs.

These changes highlight the need for borrowers to stay informed, engage with loan servicers, and explore their options for repayment. By understanding the new rules and planning ahead, students can navigate the evolving student loan landscape more effectively.