Big Beautiful Bill Student Loan Changes: What the Law Does

For the full timeline of what changes on that date and what to do before it, see the complete July 2026 borrower guide.

Repayment Plans the Law Eliminates and Creates

The OBBBA eliminates three income-driven repayment plans and creates one new one. SAVE, Pay As You Earn (PAYE), and Income-Contingent RepaymentIncome-Contingent Repayment (ICR)The oldest federal income-driven repayment plan, with payments generally set at 20% of discretionary income or a fixed 12-year amount, whichever is lower. It is the only IDR plan available to Parent PLUS borrowers after consolidation. (ICR) stop accepting new enrollments on July 1, 2026. All three sunset entirely by July 1, 2028. If you’re enrolled in one of those plans when they close, you’ll likely be automatically moved to RAP (if eligible) or IBRIncome-Based Repayment (IBR)A federal income-driven repayment plan that caps monthly payments at 10% or 15% of discretionary income, depending on when the loans were taken out. Remaining debt is forgiven after 20 or 25 years of qualifying payments..

RAP becomes available on July 1, 2026. If your loans were first disbursed on or after that date, RAP and the new Standard Repayment PlanStandard Repayment PlanThe default federal repayment plan, which spreads loan payments evenly over 10 years — or up to 30 years for consolidation loans. It usually results in the lowest total interest paid among federal plans. are your only options. If your loans predate July 1, 2026, you can stay on your current plan, switch to IBR, or opt into RAP voluntarily.

IBR is the only legacy income-driven plan that survives indefinitely. The OBBBA also removed the partial financial hardshipPartial Financial HardshipA federal eligibility standard used historically for IBR and PAYE, where a borrower qualifies if their calculated IDR payment is lower than the payment they would owe under a 10-year Standard Repayment Plan. requirement for IBR enrollment, opening the plan to borrowers who were previously locked out due to income.

Related:

• What Is the Repayment Assistance Plan (RAP)?
• What Happens to IBR and SAVE Borrowers When RAP Starts

Graduate and Parent PLUS Borrowing Limits

The OBBBA eliminates the Graduate PLUS loan program for new borrowers after July 1, 2026, and replaces cost-of-attendance borrowing with fixed caps.

New annual and aggregate limits for loans disbursed on or after July 1, 2026:

• Graduate programs: $20,500 per year, $100,000 aggregate for the degree
• Professional programs (M.D., J.D., D.D.S.): $50,000 per year, $200,000 aggregate for the degree
• Parent PLUS loans: $20,000 per year per dependent student, $65,000 lifetime per student
• Combined lifetime cap: $257,500 across all federal student loans (excluding Parent PLUS)

Under the old system, Grad PLUS loans covered up to a school’s full cost of attendance with only a minimal credit check and no fixed cap. Parent PLUS loans also had no annual or lifetime limit.

Existing Grad PLUS loans are unaffected. If you already hold Grad PLUS debt, the elimination applies only to new disbursements — your current loans keep their original terms.

Undergraduate borrowing limits are unchanged.

Related: Parent PLUS Loans: Your Options Before the June 30, 2026 Deadline

How the Law Affects Loan Forgiveness

The OBBBA changes forgiveness timelines and the tax treatment of forgiven balances, but it does not eliminate forgiveness.

RAP offers forgiveness after 30 years (360 qualifying payments). IBR offers forgiveness after 20 or 25 years, depending on when you first borrowed. RAP’s timeline is 5–10 years longer than IBR’s.

The American Rescue Plan Act temporarily excluded forgiven student loan balances from federal income tax through December 31, 2025. That exclusion has expired. IDR forgivenessIDR ForgivenessThe forgiveness of any remaining federal student loan balance after a borrower has completed 20 or 25 years of qualifying payments under an income-driven repayment plan, depending on the specific plan. discharged in 2026 or later is taxable at the federal level unless you qualify for an exception — most commonly the insolvency exclusion under IRS Form 982.

Public Service Loan ForgivenessPublic Service Loan Forgiveness (PSLF)A federal program that forgives the remaining balance on Direct Loans after 120 qualifying monthly payments made while working full-time for a government or qualifying nonprofit employer. (PSLF) was not changed by the OBBBA. The 120-payment, 10-year structure remains intact under the statute. However, a separate Department of Education rule — not part of the OBBBA — narrows the list of employers that qualify for PSLF starting July 1, 2026. That rule introduces a “substantial illegal purpose” standard and is being challenged in three federal lawsuits.

Related: Can Your Nonprofit Employer Lose PSLF Eligibility Under the New Rule?

Deferment and Forbearance Restrictions

Starting July 1, 2027, new federal student loan borrowers lose access to economic hardship and unemployment deferments. General forbearance is capped at 9 months within any rolling 24-month period.

These restrictions apply only to loans first disbursed on or after July 1, 2027. If your loans predate that date, your current deferment and forbearance options remain unchanged.

The one-year delay means this provision takes effect separately from the July 1, 2026, changes to repayment plans and borrowing limits.

Related: Does Student Loan Forbearance Affect Your Credit Score?