When the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025, it reshaped a hotly debated topic—the federal student loan system. While the bill doesn’t affect private loans, the changes to federal borrowing limits and repayment options are significant, and will impact students, parents, and graduates for years to come.
If you or your family members rely on federal student loans now, or expect to in the future, it’s important to understand what’s changing, when those changes take effect, and how to plan ahead.
Let’s take a look at how federal student loans and their repayment plan options are evolving.
The OBBBA introduces new annual and aggregate borrowing limits for students and parents, which may require more borrowers to find alternative funding sources, such as private student loans.
Explore the annual loan limits for each type below:
For most master’s and doctoral programs, the maximum a student can borrow per year will be capped at $20,500. Students in certain professional programs, like medicine, dentistry, law, and theology, will be able to borrow up to $50,000 per year.1
Grad PLUS loans previously allowed eligible students to borrow up to the full cost of attendance, with no hard annual cap. Without that option, some students may need to leverage other funding sources more heavily, including scholarships, employer assistance, or private loans.
The aggregate limit for graduate students is $100,000, or $200,000 for students in certain professional programs.1
For undergraduate students, current federal loan limits remain unchanged, ranging from $5,500 to $12,500 annually depending on class level and dependency status.2
The OBBBA does, however, introduce a new restriction for Parent PLUS loan borrowers. Parents will be limited to borrowing $20,000 per child per year, with a $65,000 lifetime cap per child.1 This is a major departure from the prior rules, which allowed parents to borrow up to the full cost of attendance.
Part-time students will also be impacted, as their annual limits will be reduced proportionally based on their enrollment status—likely starting in the 2026–2027 academic year.1
As part of a major structural change, the OBBBA has introduced a new income-driven repayment (IDR) plan called the Repayment Assistance Plan (RAP).
Under the RAP, every borrower will have a minimum monthly payment of $10, regardless of income. Individual payment requirements are then calculated as a percentage of the borrower’s adjusted gross income (AGI), minus $50 per month for each dependent.1 This formula differs from existing IDR plans, as it offers a fixed deduction per dependent rather than a larger exemption of income.
Like the SAVE plan, RAP will waive any unpaid interest each month, preventing balances from growing simply because payments aren’t high enough to cover interest charges. RAP will also reduce a borrower’s principal by up to $50 per month if the payment doesn’t already do so.1
RAP will likely require higher monthly payments from low- or no-income borrowers than current IDR plans, and it offers a longer path to forgiveness. While existing IDR plans provide cancellation after 10 to 25 years of qualifying payments, RAP requires 30 years before any remaining balance is forgiven.
Starting July 1, 2026, borrowers who take out any new loan or consolidate an existing federal loan will only be able to choose between the standard repayment plan and RAP.
The Saving on a Valuable Education (SAVE) plan, along with Pay As You Earn (PAYE) and Income-Contingent Repayment (ICR) plans, will be phased out by July 1, 2028.1
Borrowers who took out loans before July 1, 2026 will still have multiple repayment options after the transition period, including:
SAVE, however, will no longer be available to new borrowers after the phase-out period ends.
Generally speaking, the new and remaining repayment plan options will increase monthly payments for many borrowers compared to what they might have paid under SAVE—especially those with lower incomes or large family sizes. RAP’s extended loan forgiveness timeline also means borrowers will likely repay more over the life of their loans.
After July 1, 2028, most parent borrowers lose access to income-driven repayment options entirely—unless they take specific action before the deadlines.
Only Parent PLUS borrowers who consolidate their loans before July 1, 2026 and enroll in any IDR plan between now and July 1, 2028 will be eligible for an IDR option after the SAVE, ICR, and PAYE plans are eliminated.1 Those borrowers will be allowed to stay in the Income-Based Repayment (IBR) plan. However, they will not be eligible for the RAP plan.
The OBBBA does not eliminate relief programs for borrowers, but it does change the timelines.
The Borrower Defense program, for example, offers eligible students loan cancellation under certain circumstances—such as when a school has been accused of misconduct. A similar program, the Closed School Discharge program, enables students to cancel loans in the event their school closes before their coursework is completed.
While OBBBA doesn’t end these programs altogether, it does roll back some recent improvements—at least for the near future. Changes to these programs, which were originally introduced in 2023, made it easier for affected borrowers to get relief, often with automatic discharges. Under the OBBBA, these more generous rules will only apply to loans issued after July 1, 2035. Loans issued before that date will revert to the stricter, pre-2021 rules, which generally require more documentation, longer review times, and a higher burden of proof for borrowers.
The OBBBA’s changes to the federal student loan system represent a fundamental shift in borrowing and repayment options for current and future borrowers.
Changes like terminating Grad PLUS loan origination and introducing strict annual limits could impact how you or your child addresses education costs in the future.
On the repayment side of things, eliminating the SAVE plan and introducing RAP will alter monthly payment amounts, timelines, and long-term costs for many borrowers. The 30-year forgiveness period under RAP is a significant extension compared to current options, which could leave borrowers paying more interest over time.
For families with children headed to college in the next few years, timing will matter—though, naturally, only so much is within your control. Borrowers who take out loans before the critical phase-out dates (July 2026 and July 2028) may benefit from more flexible repayment options. Similarly, parents who consolidate Parent PLUS loans before July 1, 2026 can maintain their access to IBR.
The One Big Beautiful Bill Act’s student loan provisions change the rules for how much you can borrow, which repayment plans you can use, and how long it may take to achieve loan forgiveness.
Federal student loan policies and repayment plans were already complex for students and parents to navigate prior to the OBBBA. Since new rules are being implemented soon, take some time to familiarize yourself with how these changes could impact your own loan landscape—whether you’re in the process of repaying debt or taking out student loans for the first time.