🏛️ Overhaul of Federal Student Aid Under the One Big Beautiful Bill Act:
The One Big Beautiful Bill Act (OBBBA), signed into law by President Donald Trump in July 2025, implements a significant overhaul of the federal student loan system, effective starting July 1, 2026, for new loans.
These reforms aim to reduce excessive borrowing and streamline repayment options.
🏦Loan Program Eliminations and Caps:
*** Grad PLUS Program Eliminated: The Grad PLUS loan program, which previously allowed graduate students to borrow up to the full cost of attendance, will be discontinued for new borrowers beginning July 1, 2026.
*** New Graduate Borrowing Limits: New graduate students will instead be limited to Direct Unsubsidized Loans with annual caps of $20,500 and a $100,000 lifetime aggregate limit. Professional students (e.g., in law or medicine) face higher caps: $50,000 annually and a $200,000 lifetime aggregate limit.
*** Parent PLUS Loans Capped: The amount parents can borrow through Parent PLUS Loans will be capped at $20,000 per year per student, with a total aggregate limit of $65,000 per student.
🪙Repayment Simplification:
The Act replaces the existing "confusing maze" of repayment plans with a simplified system for new loans issued on or after July 1, 2026. New borrowers will have only two main options:
*** A new Standard Repayment Plan with fixed payments over 10 to 25 years, based on the loan amount.
*** The Repayment Assistance Plan (RAP): This new income-driven repayment plan consolidates former options. Monthly payments are tiered based on the borrower's Adjusted Gross Income (AGI), ranging from 1% to 10%, with a $10 minimum payment. Any remaining loan balance is forgiven after 30 years of qualifying payments.
These changes sunset the existing Income-Driven Repayment (IDR) plans like SAVE, PAYE, and ICR, which will be eliminated by July 1, 2028, for most borrowers. Existing borrowers will be directed to transition to the new RAP or the Income-Based Repayment (IBR) plan.
