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Major changes are coming to the federal student loan system in 2026. This overhaul, which primarily stems from the Trump administration’s One Big Beautiful Bill Act (OBBBA), will reshape how students borrow and pay back student loans.
These changes will take effect on July 1, 2026, for new loans, but existing borrowers will have a more gradual transition period or retain access to some current options. Here’s a closer look at how and when student loans will change and what you can do now to prepare.
Starting on July 1, 2026, the federal student loan system will have a much narrower set of repayment options for new loans. If you borrow after that date, you’ll have two repayment plans to choose from:
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Standard Repayment Plan: This plan features fixed monthly payments and spans 10 to 25 years, depending on your loan amount.
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Repayment Assistance Plan (RAP): This plan offers an income-driven approach, setting your payments at 1% to 10% of your adjusted gross income (or a flat $10 per month if your income is less than $10,000 per year). It can end in forgiveness if you’re still carrying a balance after 30 years of repayment.
If you borrow before July 1, 2026, your repayment plan options aren’t disappearing — at least not yet. You can continue to access three existing repayment plans: the 10-year Standard Plan, 10-year Graduated Repayment Plan, and 25-year Extended Plan.
You can also use the current income-driven repayment plans — Pay As You Earn (PAYE), Income-Contingent Repayment (ICR), and Income-Based Repayment (IBR) — until they expire in 2028. At that point, you’ll need to switch to a different plan (more on this below).
Currently, federal student loans are eligible for various income-driven repayment plans, including PAYE, Income-Contingent Repayment, and Income-Based Repayment. For loans disbursed after July 1, 2026, however, the new RAP option will be the only income-driven repayment plan.
What’s more, PAYE and ICR will sunset by July 1, 2028. IBR will remain available, but only for loans disbursed before July 2026.
This change may or may not affect you, depending on what plan you’re on:
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If you’re on PAYE, ICR, or the now-defunct SAVE plan: You’ll need to switch to IBR or RAP by July 1, 2028. If you don’t switch, your loan servicer will auto-enroll you in one of those plans.
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If you’re on IBR: You can stay on IBR or change to RAP after July 1, 2026.
Parent PLUS loans will not be eligible for the new Repayment Assistance Plan. Currently, the only income-driven plan available to Parent PLUS borrowers is Income-Contingent Repayment — and only if you consolidate your loans first.
If you want to access an income-driven plan moving forward, you’ll need to consolidate your Parent PLUS loans before July 1, 2026, and enroll in a qualifying IDR plan.
The SAVE plan has been blocked in the courts for a while now, but it was dealt its final blow in late 2025 when the Trump administration announced a proposed settlement with the state of Missouri.
If approved, this settlement will end the plan sooner than its initial expiration date in 2028. The Department of Education will no longer enroll new borrowers in SAVE and will begin transitioning SAVE borrowers into alternative plans.
If your loans have been on pause due to the SAVE plan litigation, it’s time to explore your other repayment options. The Federal Student Aid Loan Simulator tool can help you compare costs on alternative plans.
Starting on July 1, 2026, the borrowing limits for certain federal student loan types will change. The new rules will be:
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Graduate students: Up to $20,500 per year with a lifetime limit of $100,000 in Direct Unsubsidized Loans
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Professional students: Up to $50,000 per year with a lifetime limit of $200,000 in Direct Unsubsidized Loans
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Parent borrowers: Up to $20,000 per year per student, with a lifetime limit of $65,000 in Parent PLUS loans
The borrowing limits for Direct Subsidized and Unsubsidized Loans for undergraduate students will mostly remain unchanged. However, part-time students will see their borrowing limits reduced based on their enrollment status.
If you already have student loans, you’ll have access to the previous borrowing limits for three years or until you’ve finished your program. That means graduate and professional students can still borrow up to $20,500 per year with an aggregate limit of $138,500.
Parent borrowers can also keep borrowing under the old rules (up to their child’s cost of attendance, minus any other financial aid received) for three years or until the student finishes their program.
Related: After Trump’s budget bill, are federal student loans still the gold standard?
The OBBBA has also eliminated the Grad PLUS loan program after July 1, 2026. These loans allowed graduate and professional students to borrow up to their school’s cost of attendance with a minimal credit check. It will no longer be a financing option for graduate and professional students looking to borrow for the first time after that date.
If your federal financial aid package doesn’t cover your full cost of attendance, you may consider other financing options, such as scholarships, grants, savings, work-study, income from a part-time job, or private student loans.
If you already have a Grad PLUS loan, you can continue to borrow Grad PLUS loans for three years or until you’ve finished your program.
The Public Service Loan Forgiveness (PSLF) program forgives federal student loans for eligible public servants after 10 years of service. It also requires that you make 120 payments on an income-driven repayment plan while working for a qualifying nonprofit or government employer.
However, Parent PLUS loans issued on or after July 1, 2026 won’t be eligible for the RAP, the sole income-driven option for loans disbursed after that date. As of now, parents who borrow Parent PLUS loans in the future won’t have a pathway to Public Service Loan Forgiveness.
If you already have Parent PLUS loans and are working toward PSLF, don’t despair — you should be able to get on the Income-Based Repayment plan as long as you switch before July 1, 2028. And if you’re not on IDR yet, you’ll need to consolidate your Parent PLUS loans before July 1, 2026, and apply for a plan.
New federal student loans will no longer be eligible for economic hardship or unemployment deferments, which let you pause payments when you couldn’t afford them. This applies to loans issued on or after July 1, 2027, a year later than most of the other changes.
Forbearance will also be limited to a maximum period of nine months during a two-year period. Currently, forbearance lets you pause payments for up to 12 months at a time.
The American Rescue Act of 2021 exempted student loan forgiveness from federal taxation through the end of 2025. This exemption is unlikely to be extended, so borrowers who receive forgiveness in 2026 or after may have to pay taxes on the forgiven amount.
This largely applies to forgiveness from an income-driven repayment plan. You don’t have to pay federal taxes on loan cancellation from Public Service Loan Forgiveness.
Read more: Tax-free student loan forgiveness ends in 2025. Will you owe more?
There are a lot of changes coming for federal student loans in 2026, but they affect new borrowers and existing borrowers differently. Either way, here are some steps you can take to prepare:
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Review your current repayment plan: If you’re already in repayment, find out what plan you’re on. That way, you’ll know if you have to change repayment plans ahead of the 2028 deadline.
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Compare future repayment options: Your choices will depend on whether your loans were issued before or after July 1, 2026. It’s worth choosing a plan yourself; letting your servicer pick one for you may not be cost-effective or align with your financial goals.
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Write down key deadlines: There are a lot of dates to keep track of, so write down any deadlines that may apply to your loans.
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Plan for tighter borrowing limits: If you’re planning on graduate or professional school next year, consider how you’ll cover costs if your federal financial aid falls short.
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Assess your strategy as a parent borrower: Parent borrowers may have to act quickly if they want to access income-driven plans or become eligible for PSLF.
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Consider tax implications: If you’ll be receiving loan discharge from an income-driven plan in 2026 or after, prepare yourself for a potential tax bill on the amount.
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Update your contact information: Make sure your loan servicer has your most up-to-date details so you don’t miss any important communications about transitioning plans and deadlines.
2026 will bring a major restructuring to the federal student loan system. The best ways you can prepare are staying informed about the changes and making proactive choices before any deadlines arrive.
Tired of the uncertainty in the federal loan system? See if student loan refinancing could help you better manage your debt.