What to know ahead of the July 1 student loan shakeup
Summary
Starting July 1, major changes will affect student loan repayment options for millions of borrowers due to a law signed by President Trump. Some repayment plans will end, new ones will begin, borrowing limits will tighten, and certain borrowers, like parents using PLUS loans, will face fewer options.Key Facts
- The SAVE repayment plan will end on July 1, and borrowers must choose a new plan within 90 days or be placed in the standard plan.
- Current Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) plans will be phased out by July 1, 2028.
- New repayment options include a Tiered Standard Plan with fixed payments over 10 to 25 years and a Repayment Assistance Plan (RAP) based on income and number of dependents.
- The RAP plan requires no or low-income borrowers to pay $10 monthly, but monthly payments are not capped like other income-driven plans.
- Parent PLUS loans taken out after July 1 must be repaid under the Tiered Standard Plan, with no income-driven options, and new borrowing limits are $20,000 per year and $65,000 total per dependent.
- Graduate students will face new borrowing caps: $20,500 yearly and $100,000 lifetime for most, but professional students have higher limits of $50,000 per year and $200,000 total.
- These changes may cause some students to rely more on private loans, which have fewer protections and higher risks.
- Some legal challenges to the new borrowing limits are ongoing.
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