WASHINGTON — Major changes to federal student loan repayment rules took effect nationwide on Tuesday, simplifying options for new borrowers while ending a key Biden-era plan for millions of existing ones.
The U.S. Department of Education confirmed that, under provisions of the One Big Beautiful Bill Act signed into law in 2025, borrowers taking out new federal Direct Loans or Parent PLUS Loans on or after July 1, 2026, are now limited to two repayment plans: the Tiered Standard Plan and the new income-driven Repayment Assistance Plan (RAP).
The Tiered Standard Plan offers fixed payments over 10 to 25 years, depending on the loan balance. The RAP bases payments on a percentage of a borrower’s income, generally between 1% and 10% of adjusted gross income, with forgiveness after 30 years.
Borrowers who took out loans before July 1 and do not take new ones can generally continue with existing plans, including certain prior income-driven options, though the department is encouraging transitions to the new framework where applicable.
The changes also phase out the Saving on a Valuable Education (SAVE) plan, which had enrolled about 7 million borrowers. Those in SAVE have 90 days to switch to another plan or risk being placed automatically into the Standard or Tiered Standard Plan by their servicer.
Additional reforms include new annual and lifetime borrowing limits for undergraduates, graduates and parents, the elimination of Graduate PLUS loans for new borrowers, and stricter rules on deferment and forbearance.
Separately, the department announced that borrowers enrolled in autopay will receive a 1% interest rate reduction starting July 1, available through June 30, 2028, for those who enroll by Sept. 30, 2026.
The department described the overhaul as a simplification aimed at improving repayment predictability. Education advocates have warned that some borrowers could face higher monthly payments.
Student loan servicers began notifying affected borrowers in recent weeks. The department said it continues to update guidance on studentaid.gov as implementation proceeds. Details on impacts for individual borrowers remain subject to their specific loan history.
