Student Loans 2026 Update

The One Big Beautiful Bill Act (OBBBA) signed into law on July 4, 2025 will affect several current student loan programs. Most changes will take place on July 1, 2026, with some borrower protections changing on July 1, 2027 and 8on July 1, 202  T8.he final change will involve the final transition of the current income-driven repayment programs to the new income-driven repayment plan on July 1, 2028.

Occurring on July 1, 2026

Student borrowers with loans disbursed on or after July 1, 2026, will have only two repayment options.  They will select either the New Standard Repayment plan or the Repayment Assistance Plan

New Standard Repayment Plan 

A fixed-payment plan with repayment terms ranging from

• 10 years for smaller balances
• Up to 25 years for larger balances

The repayment period is determined by the total amount borrowed

Repayment Assistance Plan (replaces the current income-driven repayment plans)

Unlike the current income-driven plans, this new plan uses only the borrower’s adjusted gross income to calculate a new payment.

• Bases payments on income (approximately 1%–10% of income depending on earnings)
• Includes reductions for dependents  ($50 reduction per child – payment will be no less than $10 monthly)
• Requires a minimum payment of $10 per month
• Prevents negative amortization (government pays interest)
• Provides forgiveness after 30 years of repayment (no Change to Public Service Loan Forgiveness term)
• Becomes the primary income-driven option for new borrower

 

Changes to take effect on July 1, 2027

 Deferment and Forbearance

 Deferment

For new loans:

• Economic hardship deferment eliminated
• Unemployment deferment eliminated

Borrowers with older loans retain access under current rules

Forbearance Limits

Current rules:

• Up to 12 months at a time
• Up to 3 cumulative years

New Forbearance rules:

• Maximum of 9 months of forbearance during any 2-year period

These changes are not effective until after July 1, 2027

 Rehabilitation Changes

(Under current directives, a borrower may use Rehabilitation to take their student loan out of default one time)

Loan Rehabilitation

Borrowers may rehabilitate a defaulted federal student loan:

• Up to two times
• Previously only allowed once

The minimum rehabilitation payment is set at $10 minimum payment. (Previously it was $5)

Repayment Plan Elimination

Other important Changes to take effect after July 1, 2026

Current plans, PAYE, and Income Contingent will be eliminated on July 1, 2028 (Borrowers remaining in the SAVE plan will need to enroll in another plan) 

Borrowers in these plans will have a choice to take the following actions during this two-year transition period

• They may enroll in the Income-Based repaymemt plan or
• Enroll in the newer repayment assistance plan (RAP) before July 1, 2028 ,or be automatically enrolled in the RAP after this date.

Other changes (Parent PLUS loans and Graduate PLUS Loans) 

Parent PLUS Loan Changes (Effective July 1, 2026)

• Parent borrowing is capped at $20,000 per student
• The lifetime cap is  $65,000 per student
• New Parent PLUS loans will not be eligible for enrollment in RAP
• New Parent PLUS borrowers generally cannot use RAP
•  Public Service Loan Forgiveness may be more limited for many Parent PLUS borrowers

Graduate Student Loan Changes

New Graduate Borrowing Limits

Most graduate students:

• $20,500 annual limit
• $100,000 lifetime limit

Professional programs (medicine, law, dentistry, etc.):

• $50,000 annual limit
• $200,000 lifetime limit

A combined federal borrowing cap of approximately $257,500 applies across undergraduate and graduate borrowing.

Summary of Important Dates

Date             Change
July 1,2026      RAP and Tiered Standard Plan begin
July 1,2026      Grad PLUS eliminated
July 1,2026      Parent PLUS borrowing caps begin
July 1, 2027      Economic hardship and unemployment deferments eliminated for new loans
July 1,2027      New forbearance limits take effect
July 1,2028     SAVE, PAYE, and ICR are phased out and borrowers must transition to remaining plans (Income-Based/RAP, or the Tiered Standard Repayment Plan)

 

 

 

 

• This topic was modified 1 week, 4 days ago by Roy Bush.