Big changes are coming to the federal student loan system. The newly passed Opportunity and Better Borrowing for a Brighter America Act (OBBBA) introduces sweeping reforms to how student loans are issued, repaid, and regulated. While many of these changes won’t take effect until July 1, 2026, borrowers should start preparing now to make informed decisions.
Here’s what you need to know about what’s changing—and how it could affect you and your family.
Graduate and Professional Student Loan Limits
One of the most significant updates is the elimination of Graduate PLUS Loans. While current borrowers can continue using them through the end of their program, new borrowers will face stricter annual and lifetime limits:
- Graduate students: $20,500/year, $100,000 lifetime
- Professional students (like law or medical): $50,000/year, $200,000 lifetime
- Overall federal loan cap: $257,500 (excludes Parent PLUS Loans)
Colleges and universities will also be able to set program-specific borrowing limits and will be required to prorate loans based on enrollment status.
New Caps on Parent PLUS Loans
For parents helping their children fund college, Parent PLUS Loan caps are also being introduced:
- $20,000/year per child
- $65,000 total per student
After July 1, 2026, new Parent PLUS borrowers will no longer be eligible for income-driven repayment (IDR) plans, which may result in higher monthly payments and fewer long-term forgiveness options.
Accountability for Institutions
The OBBBA also holds colleges more accountable for student outcomes. Schools must now meet graduate earnings benchmarks or risk losing access to federal student loans:
- Fail 1 out of 3 years: School must disclose the risk to students
- Fail 2 out of 3 years: School loses access to federal Direct Loans
This measure is aimed at discouraging schools from offering programs that leave students with high debt and low earnings.
Repayment Changes for Current Borrowers
If you already have student loans, your repayment options are shifting too—but not disappearing. Here’s what to expect:
- You can keep or switch to Standard, IBR, Graduated, or Extended Repayment, or opt into a new plan called RAP (Repayment Assistance Plan).
- RAP will not be available until July 1, 2026.
- PAYE and ICR will be available through July 1, 2026. Borrowers must transition to another plan by July 1, 2028, or they will be automatically enrolled in RAP.
- The IBR plan is being updated:
- No longer requires financial hardship
- Forgiveness remains after 25 years
- Older borrowers may keep the 10%-of-income payment over 20 years
Repayment Options for New Borrowers After July 1, 2026
If you’re borrowing for the first time after July 1, 2026, your options are more limited:
- Standard Repayment Plan (10–25 years)
- RAP (Repayment Assistance Plan)
- Based on income and family size
- Minimum monthly payment: $10
- No access to IDR if you’re a new Parent PLUS borrower
SAVE Forbearance Ends in 2025
The interest pause on the SAVE plan ends August 1, 2025, per federal announcement. However, legal challenges are ongoing, and the plan’s future is uncertain.
Borrowers are encouraged to consider switching to IBR—even though payments may be higher. For example, a borrower earning $65,000 could pay $520/month on IBR versus $250/month on SAVE.
A few important notes:
- Months spent in SAVE forbearance don’t count toward loan forgiveness.
- A 1.5 million–application backlog may delay processing time, so act early.
What Should Borrowers Do Now?
Here are some steps to help you navigate the changes ahead:
- Exit the SAVE plan by August 1, 2025, if you’re pursuing forgiveness.
- Switch to IBR or PAYE, especially if you’re working toward Public Service Loan Forgiveness (PSLF).
- Stay in SAVE short-term if needed, but be aware interest will resume.
- Consider refinancing your loans if you plan to pay them off and want to lock in lower interest rates before federal interest resumes.
Bottom Line
The student loan landscape is changing fast—and these reforms will impact how much you can borrow, how you repay, and whether forgiveness options are available. The earlier you start understanding your options, the better prepared you’ll be.
Need help figuring out your next move? 3rd Decade mentors are here to support you with personalized guidance and financial education. Learn more here.
