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Big changes are coming to the federal student loan system—both on the lending side and on the repayment side—starting July 1. The higher education field has been paying particularly close attention to several of these policy shifts that are the subject of court battles and have the potential to affect institutions’ and families’ balance sheets: the end of the SAVE income-driven repayment plan, the rollout of the Repayment Assistance Plan (RAP), and new loan limits for graduate students. But the sweeping reconciliation law passed last summer, the (OBBBA), also includes a number of other provisions that are more quietly changing the higher education landscape for millions.

Previously, students enrolled less than full-time at both the undergraduate and graduate levels were eligible for the same loan limits as their full-time peers. But the OBBBA reduces loan limits for less than full-time students to match their level of enrollment. For example, students enrolled three-quarters of full time would generally be eligible for three-quarters of the loans available to a full-time student. Unlike with other loan limits coming into effect, such as those for graduate students and parent borrowers, there will not be a phase-in for current less than full-time borrowers; the reduced eligibility takes effect on July 1.

Graduate students and parents taking out loans for their dependent children are also subject to new loan limits starting July 1. However, if these graduate and parent borrowers (or their children) took out a Direct Loan for their program before July 1, they are eligible for a phase-in period—an “interim exception” of up to three years during which they can borrow under the old limits, largely up to the cost of attendance—before the new limits kick in.��

Not every current borrower will qualify for the “interim exception,” though. Graduate borrowers and parent borrowers’ dependent students must still have time remaining to work toward the “” in order to qualify. The phase-in period applies for the lesser of three years or the for a full-time student, minus the time the borrower has spent in the program. This means that a part-time student who has already spent three years in a graduate program that is supposed to take three years for a full-time student, or a Parent PLUS borrower whose dependent student is entering year five of a four-year undergraduate program, will not be able to borrow under the old limits. These borrowers would only be able to borrow at the new annual limits starting July 1, which are: $20,000 per year per dependent student for Parent PLUS borrowers, $20,500 per year for students enrolled in most graduate programs, and $50,000 per year for those seeking professional degrees.

And things get more complicated from there. Borrowing may also be limited based on new aggregate caps. If the parent borrower of the fifth-year student above already took out more than $65,000 in Parent PLUS loans for that student—the new aggregate limit per child, which can include loans borrowed before July 1, 2026—they cannot take out more federal loans for this student. If a graduate student who does not qualify for the interim exception already has loans that exceed the new aggregate $100,000 cap ($200,000 for professional students)—limits that can also include some previous borrowing—they can only continue to borrow more as they repay these loans (or if the loans are discharged) until they reach a new $257,500 lifetime limit.��

Starting on July 1, colleges and universities can set for student and parent borrowers that are less than the amounts allowed under the law, as long as the new limits are applied to all students enrolled in that program. In addition to limiting borrowing, presumably, schools that have opted out of participating in the federal student loan program could also begin offering loans to students at lower limits.

Schools that set lower limits are to provide documentation and notifications to students. Additional, robust, and public information—including which programs choose to assign lower loan limits and why, how those limits are set, and the effect of these loan limits on longer-term enrollment and borrowing patterns—would help the field understand the impacts of this new policy.

RAP operates in several ways that are different from the existing suite of income-driven plans, including with a minimum payment of at least $10 per month, a longer time to forgiveness, a repayment schedule that varies by income, and an interest subsidy and principal payment match for borrowers whose payments do not cover their interest and/or a certain amount of principal each month.��

It also introduces an “on-time” payment concept. OBBBA that a qualifying monthly payment for RAP is an “on-time applicable monthly payment,” which the Department of Education has as being “received on or before the due date for the current month, but after the due date for the previous month.” Borrowers must make on-time payments to benefit from the interest subsidy, matching principal payment, and 30-year forgiveness period, and payments must be on-time to qualify for Public Service Loan Forgiveness (PSLF). In addition, when a borrower is enrolled in RAP, months spent in deferment or forbearance—which are not considered “on-time” payments—will not be eligible for the PSLF . This definition is both narrower than what is considered on-time in other income-driven plans and ties the use of deferments and forbearances to a specific repayment plan instead of being a stand-alone status as has typically been the case in the past.

Lump sum , or payments that are more than the amount due, are also treated differently in RAP. Lump-sum payments advance the due date and put borrowers in a “paid ahead” status. While in RAP, borrowers must opt out of advancing the due date in order to receive interest and principal credit for future payments.

Borrowers who take out new Parent PLUS loans on or after July 1, 2026 can only repay these loans in the new, Tiered Standard Plan, a fixed-payment plan that does not qualify for PSLF. Borrowers who currently have Parent PLUS loans must have already consolidated their loans to access existing income-driven plans; otherwise, they cannot do so going forward. (Previously, Parent PLUS borrowers could only access income-driven payments by consolidating and enrolling in the income-contingent repayment (ICR) plan.) These borrowers make at least one payment on ICR before that plan is sunsetted on July 1, 2028 to maintain access to an income-based repayment (IBR) plan.��

As of March 31, 2026, borrowers are in default on their federally held student loans and more than 2.5 million are at least 90 days behind on their payments. While the number of those entering delinquency have largely returned to (too-high) pre-pandemic levels, a new wave of defaults could be coming as borrowers—some of whom may not have made a payment since 2020—exit or are removed from the after a court order ended the plan.��

While not directly tied to OBBBA, the Department that servicers would be reaching out to borrowers in with information about moving off of SAVE, also starting on July 1. (If borrowers do not choose a new plan, they will be moved into the current Standard Repayment Plan or the new Tiered Standard Plan, which may have higher payments.) Those first borrowers, if they are not able to enroll in an affordable plan this summer, may begin to fall delinquent in fall 2026, and could default in mid-2027.��

This is a long window for outreach and an opportunity for an “all hands on deck” targeted campaign. But the field must adjust outreach based on the new loan environment, identify promising practices, and assess and double down on what works. For example, borrowers who consolidate their loans to will lose access to existing repayment plans and only have access to RAP and the Tiered Standard Plan going forward. Those who opt to rehabilitate their defaulted loans may have access to an as well as a more streamlined application and process for exiting default.����

Even after cuts to staff and a related loss of expertise, operational uncertainty, and the movement of part of the loan portfolio to Treasury, the Department has that “loan servicers and Department staff have adequate resources to carry out the provisions” of the July 1 roll out. The proof will be, as they say, in the pudding, but the level of complexity—and the stakes—are high. OBBBA created a system that must offer, at least over the next several years, much more personalized guidance than ever before: Different borrowers are eligible for different types of loans, loan limits, and repayment plans. Making the wrong choice could mean losing access to benefits and resources. While the laudable goal of simplifying the student system is visible on a distant horizon, there are still miles to go before we get there.��