WASHINGTON — Sweeping changes to the U.S. federal student loan system have taken effect under a new policy that began on July 1, requiring millions of borrowers to transition to different repayment options while imposing new borrowing limits for future students.
The changes, implemented by the U.S. Department of Education under legislation enacted in 2025 and subsequent regulations finalized earlier this year, end the Biden-era Saving on a Valuable Education (SAVE) repayment plan and introduce a new Repayment Assistance Plan (RAP) alongside a tiered standard repayment option for new borrowers. Most provisions became effective on July 1, according to the department.
Borrowers currently enrolled in the SAVE plan, which had covered about 7.5 million people, are being notified by their loan servicers that they have 90 days after receiving their notice to choose another eligible repayment plan. Those who do not make a selection within that period will be automatically enrolled in a standard repayment option, according to the Department of Education. The SAVE plan's termination follows federal court rulings that prevented its continued operation.
The overhaul also narrows repayment choices for borrowers taking out new federal loans after July 1. New borrowers generally will have access only to the Repayment Assistance Plan or the new tiered standard repayment plan, replacing a broader range of income-driven repayment options previously available. Existing borrowers may continue using certain legacy repayment plans during a transition period before additional changes scheduled for 2028.
New borrowing limits have also taken effect for graduate and parent borrowers. Graduate lending is now subject to aggregate federal loan caps, while new Parent PLUS loans are limited to $20,000 per student and $65,000 per family. New Parent PLUS borrowers generally will no longer have access to income-driven repayment plans, although some borrowers who consolidated loans before the deadline retain transitional eligibility under existing rules.
The Department of Education has said the changes are intended to simplify the federal loan system, establish consistent repayment structures and reduce excessive borrowing. Education officials said the reforms would streamline a system that previously offered multiple repayment plans while maintaining access to federal student aid.
Some higher education advocates and borrower groups have expressed concern that the changes could increase monthly payments for many former SAVE participants and reduce repayment flexibility, particularly for graduate students and parents. They have also warned that loan servicers could face administrative challenges as millions of borrowers transition to new plans.
Separately, recent federal court rulings blocked a Trump administration rule that would have restricted eligibility for the Public Service Loan Forgiveness program, leaving that program unchanged while the administration considers its legal options.
