New student loan rules: What’s changing? When? Who’s affected?

Effective July 1, 2026, the U.S. government is reducing limits on some college loans, eliminating other loans completely, and offering fewer payment plans to both new and existing borrowers. These changes, part of the “One Big Beautiful Bill Act,” are meant to prevent overborrowing and simplify loan repayment. Among families still planning for college, it also means thinking even more strategically about costs and how to pay them.

New borrowers: Lower loan limits for parents and many students

• Undergraduate students: Loan limits unchanged at up to $7,500 per year and $31,000 in total.
• Parents: Loan limits declining to $20,000 per year and $65,000 in total per child.
• Graduate students: Annual loan limit remains $20,500; total declining to $100,000.
• Professional students: Loan limits rising to $50,000 per year and $200,000 in total.

In addition, the government is eliminating Grad PLUS Loans, a major funding source for students pursuing advanced degrees. This change and the reduced limits apply only to new borrowers starting loans on or after July 1, 2026. All active borrowers can continue to follow the old rules for up to three years, as long as students remain enrolled.

Who’s affected and when?

• Borrowers taking loans on or after July 1, 2026, must make payments under one of the two new plans.
• Borrowers currently on the SAVE plan must switch to another plan within 90 days of receiving notice from their loan servicer, likely coming in early July.
• Borrowers currently on PAYE and ICR plans must pick a different plan any time before July 1, 2028.

Current loan payers: Two new payment plans replacing most existing options

Two new payment plans launching on July 1, 2026, will impact millions of Americans currently taking out or paying back college loans. The changes are aimed at making loan repayment less complicated but could result in higher monthly bills for some borrowers.

1. Tiered Standard Plan (fixed payments)

Payment periods range from 10 years for loan balances below $25,000, to as long as 25 years for borrowers owing $100,000 or more. The minimum monthly payment is $50. Loan forgiveness is not available.

2. Repayment Assistance Plan (income-based)

Loan payments vary with annual income and family size. Payment amounts start at 1% of income for borrowers earning $10,000 and steadily increase to 10% for those making $100,000 or more. If monthly payments don’t cover interest and reduce principal by $50, the government pays the difference to ensure loan balances decline. After 30 years of payments, any remaining balance is forgiven.

Future college students: Reducing costs and the need to borrow

While most federal student loan limits are declining or staying flat, college costs continue to rise rapidly. The result is an increasingly larger gap between how much families will pay and how little loans will provide. Fortunately, there are many effective strategies for cutting college expenses and closing those funding gaps:

• Stay in state: On average, in-state public colleges cost about 44% to 58% less than out-of-state and private schools.¹
• Start at community college: Our research found that students can save 40% by attending two years of community college before transferring to four-year universities to finish degrees.²
• Graduate on time – or even early: Tips for shortening the time to diplomas include earning credits while still in high school, maintaining full credit loads throughout college and not changing majors along the way.
• Maximize free financial aid: Complete the FAFSA for federal aid each school year, and continually explore scholarship opportunities with college officials and online sites.
• Invest in a 529 plan: Investments grow tax free for any qualified education expenses associated with K-12, community college, four-year universities, graduate school, apprenticeship programs and job training/credentials.³

^{¹ Source: College Board, Trends in College Pricing and Student Aid 2025. Based on average tuition, fees, and room and board for 2025-26.} 

^{² Source: J.P. Morgan Asset Management, using College Board’s Trends in College Pricing and Student Aid 2025. Illustration compares total costs for a student attending four years at a four-year university versus a student attending two years at a community college before transferring to a four-year university. Future college costs estimated to inflate 5% per year. Average tuition, fees, and room and board for public college reflect four-year, in-state charges. Community college costs are based on average tuition and fees for an in-district student.}

^{³ Earnings on federal non-qualified withdrawals may be subject to federal income tax and a 10% federal penalty tax, as well as any applicable state and local income taxes. Please consult your tax professional about your particular situation.}

85bf2885-db71-11f0-890d-8b35ee1f7831