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Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteYes—some borrowers will pay more, and future students will have fewer federal borrowing options. The outcome depends on when the loan was made, whether the debt is undergraduate or graduate, income and dependents, enrollment intensity, and whether the borrower is already repaying.
President Trump signed Public Law 119-21 on July 4, 2025. The Education Department’s final regulations call it the Working Families Tax Cuts Act (previously called the One Big Beautiful Bill Act) and make the rule effective July 1, 2026.
What the law changes and when
The law changes three parts of federal student aid:
- Repayment plans, including the phaseout of existing income-contingent options and creation of a new Repayment Assistance Plan (RAP).
- Borrowing limits, including the end of Grad PLUS for new graduate borrowing and a new Parent PLUS aggregate cap.
- Borrower protections, including a second opportunity to rehabilitate a defaulted loan and revised rules for consolidation, deferment, forbearance and Public Service Loan Forgiveness qualifying payments.
The most important dividing line is June 30, 2026. The new standard repayment structure and several borrowing changes apply to loans or borrowers entering the system after that date, while separate transition rules affect people already in income-driven repayment.
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Will your monthly student-loan payment go up?
There is no single increase for everyone. New loans, very low-income borrowers, and people with graduate debt are treated differently.
New fixed standard terms for loans originated after June 30, 2026
For loans made after June 30, 2026, the Congressional Budget Office (CBO) describes a fixed standard plan whose length depends on the balance:
| Loan balance | Repayment term | Practical effect |
|---|---|---|
| Below $25,000 | 10 years | Higher monthly bill than a longer term, but less interest if paid in full |
| $25,000 to $49,999 | 15 years | Lower monthly bill than a 10-year term, with more total interest |
| $50,000 to $99,999 | 20 years | Lower monthly bill, but interest accrues for longer |
| $100,000 or more | 25 years | Lowest scheduled payment among these terms, with the greatest potential total interest |
The term can reduce the required monthly payment for a large balance, but a borrower who repays the debt in full generally pays more interest over a longer schedule.
How Repayment Assistance Plan (RAP) payments work
RAP uses adjusted gross income and family size rather than a fixed percentage of the loan balance. Its rules include:
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- A minimum monthly payment of $10.
- A payment calculated at between 1% and 10% of adjusted gross income, depending on income.
- A $50 reduction for each dependent child.
- Waiver of unpaid accrued interest when the calculated payment does not cover the interest that accrued.
- A federal match of payments of up to $50 toward principal.
- Forgiveness of any remaining balance after 30 years.
CBO estimates borrowers would pay more on average under RAP than under current law. Current plans generally allow zero-dollar payments for borrowers with very low incomes and can forgive balances sooner; RAP’s $10 floor and 30-year forgiveness period change both features.
Borrowers already in an income-driven plan
Borrowers already in an income-driven repayment plan would be moved to a new plan that charges 15% of discretionary income and has no payment cap. Remaining debt would be forgiven after 20 years for borrowers with only undergraduate debt and after 25 years when graduate debt is included.
The law directs the phaseout of existing income-contingent repayment plans and establishes RAP. For someone in SAVE or another current income-driven plan, the practical question is how the Department applies the transition rules to that account; borrowers should watch their servicer notices rather than assume the current payment or forgiveness date will continue unchanged.
What happens to Grad PLUS and graduate borrowing?
Grad PLUS is eliminated for new graduate borrowers beginning in academic year 2026–27. Under CBO’s implementation description, the program is eliminated for all borrowers beginning in academic year 2029–30. The statute and final regulations determine transition details for people already enrolled or already borrowing.
| Borrower category | New federal limit described by CBO or the Education Department |
|---|---|
| Graduate student, unsubsidized loans | $20,500 annual limit; $100,000 aggregate limit |
| Professional-degree student, unsubsidized loans | $50,000 annual limit; $200,000 aggregate limit |
| Graduate or professional student, Grad PLUS | Phased out beginning with new graduate borrowers in academic year 2026–27; CBO describes elimination for all borrowers in academic year 2029–30 |
Students whose program cost exceeds these limits may need institutional aid, scholarships, employer support, savings or private credit. Private loans can have different rates, underwriting, repayment protections and discharge rules, so replacing federal borrowing is not a one-for-one substitute.
What happens to Parent PLUS after July 1, 2026?
For borrowing beginning July 1, 2026, Parent PLUS is capped at $50,000 per parent in aggregate. Parents generally must first use the student’s maximum available unsubsidized eligibility before borrowing Parent PLUS.
CBO projects average annual Parent PLUS volume of roughly $4 billion under the new limits, compared with roughly $13 billion under current law during 2026–34. Those are federal-volume projections, not a promise that any individual parent will receive either amount.
Families should calculate the remaining cost for the entire degree before accepting a Parent PLUS loan. A lower federal cap can leave a funding gap even when the school’s published cost of attendance has not changed.
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Do subsidized loans still exist for new borrowers?
For new borrowers in academic year 2026–27, subsidized loans are converted to unsubsidized loans; the conversion applies to all borrowers beginning in academic year 2029–30. Unsubsidized loans accrue interest during periods that subsidized loans previously covered, so borrowing the same principal can produce a larger balance or higher total repayment.
CBO estimates this conversion would reduce federal outlays by $20.2 billion over 2025–34. The saving to the government is therefore a potential added interest cost for affected borrowers, depending on when they repay and whether interest is paid while enrolled or deferred.
How enrollment intensity affects borrowing
Annual federal loan limits for students enrolled less than full time are prorated to enrollment intensity. A student taking fewer credits can therefore qualify for less in that academic year than a full-time student in the same program.
CBO estimates this change would reduce loan volume by about 5% and federal outlays by $15.4 billion over 2025–34. Before dropping credits, students should ask the financial-aid office for a revised eligibility calculation; the reduction is tied to enrollment intensity, not simply to whether a student attends online or on campus.
Who faces the greatest risk of a higher bill or funding gap?
Very low-income borrowers
RAP’s $10 minimum means a borrower who previously qualified for a zero-dollar payment may owe something each month. The dependent-child reduction and interest waiver can soften that effect, but they do not remove the minimum.
Borrowers with graduate debt
Graduate debt can trigger the 25-year forgiveness timeline for borrowers transitioned from an income-driven plan, and new graduate students face both the Grad PLUS phaseout and aggregate unsubsidized caps.
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Families relying heavily on Parent PLUS
The $50,000 aggregate cap and the requirement to use the student’s maximum unsubsidized eligibility first can create a shortfall for high-cost programs or multiple years of attendance.
Part-time students
Prorated annual limits can reduce the federal loan available in a term when enrollment falls below full time, even if tuition and living costs do not fall proportionally.
Borrowers with large balances
The new standard schedule gives balances of $100,000 or more a 25-year term. That lowers the scheduled payment compared with a shorter schedule but increases the period during which interest can accumulate.
How large are the projected federal savings?
CBO projects the repayment changes will reduce federal direct outlays by $294.6 billion over 2025–34. It projects another $51.2 billion reduction from the loan-limit subtitle over the same period.
These are budget estimates, not guaranteed borrower savings. CBO cautions that borrower choices, school behavior and Department implementation could make the effects larger or smaller than projected. In particular, how many borrowers select RAP, remain in another available plan or change enrollment and borrowing will affect actual results.
Default, consolidation and public-service protections
The final regulations allow a borrower who has already rehabilitated a defaulted loan to rehabilitate it a second time. Rehabilitation can remove the default status after the required process, although it does not erase the underlying debt.
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Quick Recap
What borrowers should do before the changes apply
- Sign in to your federal loan account and list each loan’s disbursement date, type, balance and whether it is undergraduate, graduate or Parent PLUS debt.
- Ask your servicer which repayment plan will apply after the transition and request the projected payment, forgiveness date and treatment of unpaid interest in writing.
- If you plan to start graduate or professional school, obtain the school’s full borrowing plan for all years and compare it with the new annual and aggregate federal limits.
- If a parent will help finance school, calculate the remaining cost after the student’s maximum unsubsidized eligibility and the Parent PLUS cap.
- If you attend less than full time, have financial aid recalculate your annual eligibility before changing enrollment.
- If you are in default, ask whether a second rehabilitation is available and how consolidation, deferment or forbearance would affect your repayment and PSLF record.
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