After the recent budget reconciliation agreement signed by Congress and President Donald Trump, student loan borrowers are facing a new reality. The changes, set to go into effect between July 1, 2026, and July 1, 2028, include:
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Significant reductions in federal loans for graduate students and parents.
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A revamped landscape for repayment plans.
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Restrictions on relief options for struggling borrowers.
According to Stanley Tate, a lawyer specializing in student debt issues, since these changes were legislated by Congress, they are not vulnerable to legal challenges. This clarity in the rules provides borrowers with a more defined path forward in navigating their student loan options.
The bill will impact nearly all student loan borrowers, so it’s essential to research the changes thoroughly and make informed decisions. Here are the eight key takeaways:
1. Severe cuts to graduate student borrowing
Federal PLUS loans for graduate and professional students will no longer be available starting July 1, 2026.
These borrowers will now have borrowing limits for graduate studies:
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For graduate students: up to $20,500 per year; $100,000 total.
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For professional and medical students: up to $50,000 per year; $200,000 total.
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Lifetime maximum: up to $257,500.
Without grad PLUS loans, these borrowers may need to consider private student loans for additional funding, with fewer borrower protections and no forgiveness programs.
Lesley Turner, an associate professor at the University of Chicago, warns that private student loans may come with higher interest rates and no guarantee of access.
Timing, impact and next steps
These changes will affect students starting their graduate programs on or after July 1, 2026. If you are currently enrolled or plan to start before this date, you still have the option to take out grad PLUS loans for up to three years or the duration of your program, whichever is shorter.
If you are considering graduate school in the future, it is essential to compare program costs, explore grants, and consider private student loans as a last resort.
Turner advises students to shop around for different programs to find the most cost-effective options.
Future changes may see more programs designating themselves as professional to access higher loan limits, Turner adds.
2. Repayment plans get complete overhaul
Millions of borrowers may need to change their student loan repayment plan as most income-driven repayment plans will no longer be available starting July 1, 2026. This includes:
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The Saving on a Valuable Education (SAVE) plan.
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The Pay as You Earn (PAYE) plan.
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The Income-Contingent Repayment (ICR) plan.
Existing borrowers will be able to retain a modified version of the Income-Based Repayment (IBR) plan and the law removes the financial hardship requirement for IBR enrollment.
New borrowers will have access to a modified standard plan and the Repayment Assistance Plan (RAP).
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The modified standard plan splits monthly payments over 10, 15, 20, or 25 years based on the amount of debt.
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The RAP plan caps monthly payments based on income and family size and offers forgiveness after 30 years.
Timing, impact and next steps
Current borrowers looking to remain on an IDR plan must switch to IBR no later than July 1, 2028. Otherwise, they will be moved to the RAP plan.
The modified standard plan and RAP will be available to new and existing borrowers starting July 1, 2026.
For current students: Any new loans taken out after July 1, 2026, will only be eligible for RAP and the standard plan, as all loans must be repaid under the same plan.
3. Parent borrowers face lower borrowing limits, blocked from income-driven repayment
Parents taking out parent PLUS loans will no longer be able to borrow up to the cost of attendance starting July 1, 2026.
New parent PLUS borrowers after this date will only have the standard plan for repayment, without access to IDR or RAP.
This change applies to all parent PLUS loans, regardless of when they were taken out, potentially causing issues for families with multiple children in college.
Tate advises current borrowers to consolidate their existing loans and enroll in the Income-Contingent Repayment plan before July 1, 2026, to retain access to IDR plans.
Families relying on parent PLUS loans need to carefully consider long-term college financing to avoid funding gaps, according to Megan Walter from the National Association of Student Financial Aid Administrators.
Parents can borrow up to $20,000 per year, with a total limit of $65,000, which requires thoughtful planning for multiple children in college.
4. Pell Grants for short-term workforce training programs
Pell Grants can now be used for short-term workforce training programs, opening opportunities for students pursuing various vocational paths.
Eligible programs must meet specific criteria, excluding certain types of programs like language learning and study abroad courses.
This expansion of Pell Grants is a result of bipartisan efforts and can provide significant support to students pursuing non-traditional education paths.
5. Stricter limits on forbearance, deferment, and other relief options
Future borrowers will face more stringent requirements for temporary relief options like deferment and forbearance, with reduced periods allowed for these programs.
Unemployment and economic hardship deferments will be eliminated, and forbearances will be limited to nine months within a 24-month period.
6. More difficult to get student loan forgiveness
New borrowers will have to make payments for 30 years under the Repayment Assistance Plan to qualify for forgiveness, which is a longer timeframe compared to existing IDR plans.
Public Service Loan Forgiveness remains unaffected by these changes, although there were initial concerns about eligibility for medical and dental residents.