Federal student loan changes begin July 1, ending the Biden-era SAVE plan and shrinking repayment choices to two options. The overhaul also caps how much graduate and Parent PLUS borrowers can take out, with several million borrowers set to adjust their plans
On July 1, a major federal shift in student loans will start reshaping monthly bills for millions of borrowers—especially those who had been leaning on the Biden-era repayment program that will soon disappear.
The shakeup arrives as the federal government holds roughly 43 million Americans’ student loan debt, totaling nearly $1.7 trillion, according to the Office of Federal Student Aid, a division of the Department of Education.
Education Secretary Linda McMahon. whose mission is to shutter the department. has said the Trump administration will no longer tolerate American taxpayers taking on debts that are not their own. The changes are part of provisions within President Donald Trump’s signature tax law—the Working Families Tax Cuts Act—passed last year. along with other executive orders targeting the Department of Education.
For borrowers, the most immediate change is the end of SAVE.
The Biden-era repayment program called Saving on a Valuable Education, or “SAVE,” currently has about 7 million borrowers enrolled. Starting July 1, those borrowers will have 90 days to switch to a new plan. The Education Department says the goal is to simplify repayment options. even as advocates warn it could mean higher monthly payments and wider financial fallout.
After July 1, new student loan borrowers will be able to choose only two repayment plans: the Repayment Assistance Plan (RAP) or the Tiered Standard repayment plan. Education officials say phasing out other plans will make it smoother for borrowers to stay current.
But student loan advocates say RAP could be costly. The Institute for College Access & Success (TICAS) found that the median U.S. household could see student loan defaults spike and premiums increase by hundreds of dollars a month.
For graduate students, the changes are equally stark—this time through borrowing caps.
As of July 1, graduate students pursuing Master’s degrees will be limited to $20,500 per year or $100,000 in total. Professional students, which includes law school or medical school, will be capped at $50,000 per year or $200,000 in total.
The overhaul also tightens Parent PLUS loans. Parent PLUS now carries a $65,000 lifetime limit on loans to parents for their children to attend college. In all, the Education Department says most graduate borrowers will not be allowed to take out loans exceeding $257,500.
Education experts who spoke to ABC News warned that the new caps could dramatically curtail graduate borrowing—or push some students to abandon plans for graduate education altogether. Clare McCann. policy director at the Postsecondary Education & Economics Research (PEER) Center. told ABC News that it’s conceivable some graduate borrowers won’t achieve the degrees they want.
“This may end up being a bit of an overcorrection,” McCann said. “We could see implications for student access.”
The Education Department argues the caps will do the opposite—reduce what it calls excessive borrowing and force institutions to evaluate their costs.
Department of Education Under Secretary Nicholas Kent told ABC News the caps will ensure higher education is more affordable for millions of Americans.
“Affordability is the name of the game right now,” Kent said. “These loan caps will put downward pressure on institutions to lower their costs. We’ve got to get the cost of higher education down in this country. We’ve got to make the system less cumbersome, less complex, [and] easy to understand.”
Kent’s message also reflects an ongoing pushback against broad debt relief. Former President Joe Biden attempted a signature student loan forgiveness plan for more than 40 million borrowers. but it was struck down by the Supreme Court in 2023. In a 6-3 decision. the court ruled that Biden’s Department of Education exceeded its authority under the HEROES Act—a 2003 law that allows the government to provide relief to student loan recipients when there is a “national emergency.”.
For borrowers trying to navigate what comes next, the Education Department says help is available online.
The department has created a “repayment calculator” on its website where students can calculate their monthly bills and compare plans. Borrowers can apply for one of the two new repayment plans on StudentAid.gov, and the Education Department says the application will take 10 minutes to complete.
Kent also urged students to return to active repayment, saying broad student loan forgiveness once promised to borrowers is not going to happen.
“[Borrowers] have a responsibility as somebody who took out a loan to repay it,” Kent said. “It’s not your neighbor’s job to repay your loan, it’s your job to repay your loan, but there are tools available to help you to make sure that you have a manageable payment.”
student loans SAVE plan repayment plans Repayment Assistance Plan Tiered Standard graduate borrowing limits Parent PLUS StudentAid.gov Nicholas Kent Linda McMahon