WASHINGTON — New federal rules simplifying student loan repayment options and limiting borrowing for some graduate students took effect Tuesday, marking one of the most significant overhauls to the U.S. student debt system in decades.
The changes, stemming from the One Big Beautiful Bill Act signed into law in 2025, eliminate the Biden-era Saving on a Valuable Education (SAVE) plan and restrict new borrowers to two repayment options: the income-driven Repayment Assistance Plan (RAP) and a Tiered Standard repayment plan.
Under the new rules, borrowers taking out federal Direct Loans or Parent PLUS Loans on or after July 1, 2026, will have only those two choices. The Tiered Standard plan features fixed payments over 10 to 25 years, depending on loan balance. The RAP bases payments on 1% to 10% of discretionary income, with potential forgiveness after 30 years.
Existing borrowers who do not take out new loans can generally continue under prior repayment plans, including remaining income-driven options. However, the roughly 7 million to 7.5 million borrowers currently enrolled in the SAVE plan are being transitioned. Federal loan servicers began issuing notices on or around Tuesday, giving them at least 90 days to select a new plan or face automatic placement into a standard option.
Additional provisions include new annual and aggregate borrowing limits for graduate and professional students, and the elimination of the Graduate Direct PLUS Loan program for new borrowers.
The U.S. Department of Education described the reforms as a simplification aimed at ensuring borrowers repay their loans while reducing complexity. “If you take out a loan, you must pay it back,” Under Secretary of Education Nicholas Kent said in a prior statement.
The total U.S. federal student debt stands at approximately $1.7 trillion. Borrowers are advised to visit StudentAid.gov for personalized information on how the changes affect their loans.
Details on implementation continue to emerge as servicers process transitions.
