Key Student Loan Changes Education Professionals Need to Know

H.R. 1 also known as the “One Big Beautiful Bill” is ushering in major reforms to the federal student loan system. These changes will affect how students borrow, repay, and manage federal loans starting in the coming years. Below is an overview of the key provisions and their implications for those supporting students and families.

Simplified Repayment Plans

Effective July 2026, all federal student loan repayment options will be consolidated into two plans:

• Fixed Payment Plan

  Borrowers will make equal monthly payments until the loan is paid off, typically over 10 to 25 years depending on the loan balance.

  
  

• Income-Based Repayment (RAP)

  Borrowers will pay between 1% and 10% of their income each month, with a minimum payment of $10. Any remaining balance will be forgiven after 30 years of payments.

All existing repayment plans, including SAVE, PAYE, and REPAYE, will be phased out.

Federal Loan Borrowing Caps

The new law sets lifetime limits on how much students can borrow in federal student loans:

• Undergraduate students: Up to $50,000 total
  

• Graduate students: Up to $100,000 total
  

• Professional students (e.g., medical, law): Up to $150,000 total
  

Parent PLUS loans will remain available, but only after students have borrowed up to these federal limits.

Annual Loan Caps

Borrowing limits will also apply on an annual basis:

• Federal Direct Unsubsidized Stafford Loans ffor Undergraduates: The annual loan limit is capped at the median national Cost of Attendance (COA) for the student’s program, minus any Pell Grant the student receives. This replaces today’s grade-level limits and ties borrowing to program costs. Unlike today's limits tied to grade level (e.g., $5,500, $6,500, $7,500), this new rule shifts borrowing to program‑based needs.
  

• Federal Direct Unsubsidized Stafford Loans for Graduates: Up to $20,500 per year
  

• Professional Stafford Loans (e.g., medicine, law):Up to $50,000 per year

Stricter Deferment and Forbearance Rules

Borrowers will be limited to a total of nine months of deferment or forbearance within any 24-month period. This reduces flexibility for students facing financial hardship.

End of Graduate PLUS Loans

Graduate PLUS loans will no longer be available to new borrowers after July 2026. Graduate students will rely solely on standard federal loans within the new borrowing caps.

Institutional Accountability

Colleges and universities will be held accountable for their graduates’ earnings. Institutions whose graduates do not meet minimum income thresholds may lose access to federal student loan programs. This aims to promote better return on investment for students.

Employer Student Loan Assistance

Employers can now provide up to $5,250 per year in tax-free student loan repayment assistance, with the amount indexed for inflation. This creates opportunities for partnerships between schools, students, and employers.

What This Means for Your Advising and Outreach Work To prepare for these changes, here are some steps you can take:

• Update financial aid counseling materials to reflect the new loan limits and repayment structures

  
  

• Advise students on the importance of proactive debt management given reduced deferment options

  
  

• Emphasize college return on investment when guiding students toward programs

  
  

• Promote awareness of new employer student loan assistance benefits

  
  

The first major changes will take effect in July 2026, giving professionals time to adjust advising strategies and support tools. Read the full text here: https://rules.house.gov/sites/evo-subsites/rules.house.gov/files/evo-media-document/file_8654.pdf