Student Loan Changes on July 1, 2026: What Borrowers Need to Do

Multiple federal student loan programs change on July 1, 2026. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, replaces most income-driven repaymentIncome-Driven Repayment (IDR)A category of federal student loan repayment plans that calculate monthly payments based on income and family size rather than loan balance. Any remaining balance can be forgiven after 20–25 years of qualifying payments. plans, eliminates Grad PLUS loans, caps graduate and Parent PLUS borrowing, and launches the new Repayment Assistance Plan (RAP). A separate Department of Education rule narrowing PSLFPublic 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. employer eligibility also takes effect on the same date.

This page covers every change, who it affects, and what to do before the deadline.

RAP Launches — Legacy Repayment Plans Begin Phasing Out

On July 1, 2026, the Repayment Assistance Plan becomes available to all federal Direct Loan borrowers except those with Parent PLUS loans. RAP calculates payments as a percentage of your adjusted gross incomeAdjusted Gross Income (AGI)A borrower's total taxable income minus specific deductions, as reported on a federal tax return. Federal income-driven repayment payments are generally calculated using AGI. (ranging from 1% to 10%) and offers forgiveness after 30 years.

If your loans were first disbursed on or after July 1, 2026, RAP and the new Standard Repayment Plan are your only options. You cannot enroll in Income-Based Repayment (IBR), Pay As You Earn (PAYE), 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), or SAVESAVE Plan (SAVE)The Saving on a Valuable Education Plan, a federal income-driven repayment plan introduced in 2023 to replace REPAYE. Its implementation has been subject to ongoing litigation, and enrolled borrowers have faced court-ordered forbearance periods..

If your loans predate July 1, 2026, you can stay on your current plan, switch to IBR, or opt into RAP voluntarily. But PAYE, ICR, and SAVE stop accepting new enrollees on July 1, 2026, and all three sunset by July 1, 2028. After that, borrowers who haven’t switched will be automatically moved to RAP (if eligible) or IBR. If you don’t choose a plan by then, you default to the 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. — higher monthly payments and no path to forgiveness.

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. is the only legacy income-driven plan that survives — it remains available indefinitely for borrowers with loans disbursed before July 1, 2026.

Related: What Is the Repayment Assistance Plan (RAP)?

Deciding Between IBR and RAP

The choice between IBR and RAP depends on where you are in repayment. IBR calculates payments at 10% or 15% of discretionary incomeDiscretionary IncomeFor federal income-driven repayment plans, a borrower's adjusted gross income minus a set percentage of the federal poverty guideline for their family size. Monthly IDR payments are calculated as a percentage of this amount. (depending on when you borrowed) and offers forgiveness after 20 or 25 years. RAP uses a different formula — a sliding percentage of your full AGI — and offers forgiveness after 30 years, with interest subsidies and principal reductions.

If you’re close to forgiveness on your current plan, switching to RAP may extend your timeline. If you’re early in repayment with a high balance, RAP’s interest subsidies may reduce what you owe over time.

Related: IBR vs RAP: Which Student Loan Repayment Plan Is Better for You?

Switching From SAVE, PAYEPay As You Earn (PAYE)A federal income-driven repayment plan that caps monthly payments at 10% of discretionary income and forgives remaining debt after 20 years. It is only available to borrowers who took out their first federal loans on or after October 1, 2007., or ICR

If you’re currently on SAVE, PAYE, or ICR, you don’t need to act immediately — but you need a plan before July 1, 2028. Your options: switch to IBR now, wait for RAP, or do nothing and accept the automatic transition.

Switching plans does not reset your progress toward PSLF or IDR forgiveness in most cases. Your qualifying paymentQualifying PaymentA monthly loan payment that counts toward federal forgiveness programs like PSLF or IDR forgiveness. Whether a payment qualifies depends on the loan type, the repayment plan, and the borrower's employment at the time of payment. count carries over.

Related: Should You Switch IDR Plans in 2026?

Parent PLUS Loans — Consolidation Deadline Is June 30, 2026

Parent PLUS borrowers who have not consolidated into a Direct Consolidation Loan by June 30, 2026, permanently lose access to every income-driven repayment plan — ICR, IBR, and RAP. That also means no path to forgiveness through IDR or PSLF.

This is a disbursement deadline, not an application deadline — your consolidation loan must be disbursed by June 30. The Department of Education recommends applying no later than April 1, 2026.

If you’ve already consolidated and are enrolled in ICR or IBR, your current plan remains in effect. But there’s a trap: if you take out a new Parent PLUS loanParent PLUS LoanA federal Direct PLUS Loan taken out by the biological, adoptive, or stepparent of a dependent undergraduate student. The parent is legally responsible for repayment, not the student. after July 1, 2026, all of your existing Parent PLUS consolidation loans lose IDR eligibility — even the ones already enrolled in an income-driven plan. New borrowing after the deadline contaminates the entire portfolio.

New Parent PLUS loans issued after July 1, 2026, are also subject to new borrowing caps: $20,000 per year per dependent student and $65,000 lifetime per student. These replace the previous cost-of-attendance model, which had no fixed cap.

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

How Consolidation Preserves Your Options

Consolidation converts your Parent PLUS loans into a Direct Consolidation Loan, which is eligible for ICR and — under current rules — IBR. From there, you can pursue PSLF (if you work for a qualifying employer) or 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. after 20–25 years.

You consolidate through StudentAid.gov. When you apply, you select a repayment plan. To enroll in ICR or IBR immediately, complete the IDR application at the same time.

Related: Parent PLUS Loan Consolidation: What It Does, What It Doesn’t, and What Changed

Graduate and Professional Borrowing — Grad PLUS Ends, New Limits Begin

The OBBBA eliminates the Graduate PLUS loan program for new borrowers after July 1, 2026. If you currently hold Grad PLUS loans, nothing changes for your existing debt — the elimination applies only to new disbursements.

For students enrolling in graduate or professional programs after July 1, 2026, federal borrowing operates under fixed annual and aggregate caps:

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

These limits replace the previous system, where Grad PLUS loans covered up to the school’s full cost of attendance with only a minimal credit check. The new structure caps federal exposure but may push some students toward private loans — which carry higher rates and no access to federal forgiveness or income-driven repayment.

Undergraduate borrowing limits are unchanged.

Related: Subsidized vs. Unsubsidized Student Loans

PSLF — New Employer Eligibility Restrictions

A separate rule — not part of the OBBBA — also takes effect on July 1, 2026. The Department of Education published a final rule on October 30, 2025, amending 34 C.F.R. § 685.219 to narrow the list of employers that qualify for Public Service Loan Forgiveness.

Under the new rule, no payment counts as a qualifying PSLF payment for any month where your employer engaged in activity constituting a “substantial illegal purpose.” The rule lists specific disqualifying activities, including aiding federal immigration law violations.

The rule applies prospectively — it does not affect payments already credited before July 1, 2026. But any qualifying payment made on or after that date is subject to the new employer test.

Three federal lawsuits challenge the rule. If a court issues an injunction before July 1, the effective date could be delayed. As of March 2026, no injunction has been issued.

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

Deferment and Forbearance Restrictions (July 2027)

A separate set of OBBBA provisions takes effect one year later, on July 1, 2027. These do not affect existing borrowers — only new borrowers after that date.

Starting July 1, 2027, new borrowers will no longer qualify for economic hardship or unemployment deferments. Forbearance will be capped at 9 months within any rolling 24-month period.

These are real changes, but they apply to a different group (future borrowers) on a different timeline (one year later).

Related: Does Student Loan Forbearance Affect Your Credit Score?

What You Should Do Before July 1, 2026

Here’s what applies based on your situation:

If You Have Parent PLUS Loans

Apply for consolidation through StudentAid.gov now — processing takes weeks. Miss this window, and income-driven repayment and forgiveness disappear permanently for unconsolidated Parent PLUS loans.

Related: Parent PLUS Loan Repayment Options

If You’re on SAVE, PAYE, or ICR

You don’t need to act before July 1, 2026, but you do need a plan before July 1, 2028, when PAYE, ICR, and SAVE sunset entirely. Your two long-term options are IBR and RAP. Once RAP is available in July 2026, you can compare both plans against your specific income and balance before deciding.

Related: What Happens to IBR and SAVE Borrowers When RAP Starts

If You’re on Track for PSLF

Certify your employment and confirm your qualifying payment count before July 1. Payments credited under the current employer eligibility rules are not affected by the new “substantial illegal purpose” standard. If you’re deciding between IBR and RAP for your remaining payments, the plan you choose affects how much you pay before forgiveness.

Related:

• PSLF Qualifying Payments: What Counts and What Doesn’t
• Is RAP or IBR Better for PSLF? How to Choose the Right Plan

If You’re a Current or Prospective Graduate Student

Grad PLUS loans are no longer available to new borrowers after July 1, 2026. If you’re currently borrowing Grad PLUS loans, your existing loans are unaffected. If you’re entering a graduate or professional program after July 1, 2026, you’ll borrow under the new annual and aggregate limits. Evaluate whether the new federal caps cover your program’s costs or whether you’ll need to supplement with private loans.

For All Borrowers

Log in to StudentAid.gov and confirm your loan details, servicer, and repayment plan. Changes of this scale create processing backlogs — verifying your records now reduces the risk of errors later.