What changes to federal loans will take effect on July 1
Learn about new student loan limits, federal payment changes, and Pell Grant adjustments that go into effect July 1
Thousands of students and families in the United States will have to adapt to new rules for financing higher education. Starting July 1, major changes to federal student loans and some financial aid programs will go into effect. The changes include new debt limits, fewer payment options and adjustments to the requirements to access certain scholarships. If you have student loans or plan to apply for financial aid to study, here's what you need to know.
The new provisions are part of the One Big Beautiful Bill Act, passed during President Donald Trump's administration. According to the United States Department of Education, the measures seek to simplify the student loan system and control the growth of educational debt, which currently amounts to about $1.9 trillion.
“These are the changes of this magnitude that we have seen in a long time,” Sarah Austin, policy analyst for the National Association of Student Financial Aid Administrators (NASFAA), told CBS News.
There will be stricter limits on borrowing student loans
One of the most relevant changes will affect Parent PLUS loans, a program that allows parents to finance their children's college studies.
Until now, parents could apply for loans in an amount equal to the full cost of attendance. However, starting July 1, the limit will be $20,000 per year and a maximum of $65,000 per student for their entire academic career.
Graduate students will also face new restrictions. Although they will continue to be able to borrow up to $20,500 annually through certain federal programs, they will no longer be able to accumulate more than $100,000 in graduate school loans.
In the case of careers considered professional by the Department of Education, such as medicine, law, pharmacy, veterinary medicine, optometry, osteopathy, podiatry, theology, clinical psychology and chiropractic, an annual limit of $50,000 and a total cap of $200,000 will be established.
Additionally, new applicants will no longer be able to access Graduate PLUS loans, a program that allowed them to cover virtually any remaining educational expenses. Those who already participate in that program will be able to keep their current benefits.
Another important change is the creation of a maximum lifetime debt limit. With a few exceptions, anyone who takes out federal loans under the new rules will have a cumulative cap of $257,500 throughout their entire educational career.
“That's per borrower, so throughout your educational experience, adding up your undergraduate and graduate studies, that will be your maximum limit,” said Winston Berkman-Breen, legal director of the organization Protect Borrowers.
Fewer options for repaying loans
The rules will also change the repayment plans available to those applying for new federal loans. Starting July 1, new borrowers will only have access to two alternatives: the Standard Tiered Plan and the new Payment Assistance Plan (RAP), based on the applicant's income.
Those who already have federal loans and do not apply for new credits will be able to continue using the current programs, including the standard plan, the extended plan, the gradual plan and the Income-Based Repayment Plan (IBR).
However, Pay As You Earn (PAYE) and Income Contingent Reimbursement (ICR) programs will begin to phase out. Borrowers enrolled in those plans will need to switch to another option by July 1, 2028.
What will happen to those who are enrolled in SAVE
The changes will also impact millions of people enrolled in the SAVE (Saving on a Valuable Education) plan, created during the Joe Biden administration. The new legislation states that this program will end in July 2028. However, borrowers will have to choose a new payment option before that date.
According to experts, loan servicers will begin contacting participants to inform them about the transition process.
“If they don't do anything in that 90-day period, the loan servicer will automatically put them on the standard plan,” Austin said.
SAVE beneficiaries will be able to opt for RAP or some of the payment plans that remain in force.
Pell Grant rules also change
The One Big Beautiful Bill not only modifies student loans, it also introduces adjustments to the Pell Grant, the main federal support program for low-income students.
Under the new rules, those who receive scholarships or outside aid sufficient to cover the full cost of tuition will no longer be able to obtain additional funding through the Pell Grant.
The legislation also eliminates a situation that allowed some students with low incomes but large amounts of assets or wealth to qualify for aid.
On the other hand, the law expands access to the Pell Grant for students enrolled in short-term job training programs. Areas such as nursing care, early childhood education and automotive mechanics could benefit from this measure.
“Starting July 1, 2026, students will be eligible to receive Pell Grants to enroll in high-quality, short-term educational programs that prepare them for high-skilled, well-paying, in-demand jobs,” said the U.S. Department of Education.
Parents and students must be very attentive to all these changes to protect themselves financially, since they could request a loan or aid, without taking into account their own financial capacity and the new limits established by the government.