President Donald Trump’s “Big Beautiful Bill” included significant student loan changes that took effect on July 1, including new repayment plans and borrowing caps. At the same time, the Trump administration is in the process of eliminating the Biden-era SAVE plan after a federal court struck it down earlier this year. It marks the latest chapter in a dizzying series of student loan changes since the pandemic-era pause on payments, leaving some borrowers frustrated. “I’ve never seen so much anxiety with borrowers,” said Betsy Mayotte, founder of the Institute of Student Loan Advisors (TISLA). “I’ve seen some people whose payments have gone up significantly.”We asked the U.S. Department of Education what’s driving these changes and how they could impact Americans. SAVE plan shut down More than 7 million borrowers who were enrolled in the SAVE plan should expect to be contacted in the coming weeks. The notices won’t all go out at once but instead will be sent in two-week sets, according to Under Secretary of Education Nicholas Kent. After a borrower is contacted, they will have 90 days to choose another income-driven repayment plan, or they will be moved into a standard plan. Asked how he would respond to Americans who are concerned about higher monthly payments, Kent said, “The SAVE plan was just broad student loan forgiveness wrapped up in a different wrapping paper, and so to compare the plans is not fair. One is congressionally authorized.” The Biden administration bypassed Congress to offer broader relief to Americans struggling with mounting debt, but critics argued the payments were artificially low at the expense of taxpayers. New repayment plans Two new repayment plans went live on July 1, part of the “Big Beautiful Bill” passed last summer by the Republican-led Congress. Students who take on loans moving forward will be able to enroll in the Tiered Standard Plan or the Repayment Assistance Plan (RAP). “There will be fewer repayment plans to confuse borrowers and easier repayment plans for borrowers to navigate,” Kent said. Under RAP, a borrower’s monthly payment depends on their income and number of dependents. The plan also ensures that borrowers who make full, on-time monthly payments will be shielded from runaway interest. Under the Tiered Standard Plan, borrowers will pay a fixed amount over the course of anywhere from 10 to 25 years based on their outstanding loan balance, giving those with higher debt lower monthly payments and more time to repay. Click here to compare and contrast plans. Temporary interest rate reduction The Education Department is offering a temporary 1% interest rate reduction, beginning on July 1, for certain borrowers who enroll in autopay by September 30, 2026. It will remain in effect through June 30, 2028.Borrowers who were already enrolled in autopay will also get the 1% discount, up from the 0.25% that they were previously receiving. This group does not need to take further action. The discount will benefit borrowers whose Federal Direct Loans originated after July 1, 2012. Borrowers who are in default must consolidate their eligible loans and apply for a new repayment plan before enrolling in autopay.Kent said the interest rate reduction is intended to incentivize borrowers to get back into active repayment and improve the health of the federal student loan portfolio, at a time when roughly 9 million are in default. Borrowing capsAnother part of the “Big Beautiful Bill” that took effect on July 1 limits how much money parents of undergraduates and graduate students can borrow in the first place. There are higher caps for certain professional degrees, but that list is currently the subject of litigation. Parent PLUS loans limited to $20,000 per student annually, $65,000 per dependent student in total.Graduate students limited to $20,500 annually, $100,000 in total Professional students limited to $50,000 annually, $200,000 in total Previously, federal loans covered the full cost of these programs. Some fear that these caps will make school unaffordable for students who can’t bridge the gap. When asked about those concerns, Kent argued that these guardrails are necessary to curb excessive debt and put pressure on universities. “These loan caps are putting downward pressure on institutions to lower their costs,” he said. Shifting student loan services All of these changes are happening as the Education Department is starting the process of shifting the federal student loan portfolio to the Treasury Department through an inter-agency partnership.Kent said the Trump administration is still primarily focused on “phase one,” which includes shifting management of borrowers who are in default. He said some work on phases two and three has started, but he wouldn’t provide a timeline for when the transition will be complete. Critics warn that the shift could cause more confusion for borrowers and that dismantling the Education Department could hurt services that students rely on. “Services should not see a substantive change when it comes to their interactions with the department or their servicer as a result of this partnership,” Kent said. “If anything, they should see better customer service.”
President Donald Trump’s “Big Beautiful Bill” included significant student loan changes that took effect on July 1, including new repayment plans and borrowing caps.
At the same time, the Trump administration is in the process of eliminating the Biden-era SAVE plan after a federal court struck it down earlier this year.
It marks the latest chapter in a dizzying series of student loan changes since the pandemic-era pause on payments, leaving some borrowers frustrated.
“I’ve never seen so much anxiety with borrowers,” said Betsy Mayotte, founder of the Institute of Student Loan Advisors (TISLA). “I’ve seen some people whose payments have gone up significantly.”
We asked the U.S. Department of Education what’s driving these changes and how they could impact Americans.
SAVE plan shut down
More than 7 million borrowers who were enrolled in the SAVE plan should expect to be contacted in the coming weeks. The notices won’t all go out at once but instead will be sent in two-week sets, according to Under Secretary of Education Nicholas Kent.
After a borrower is contacted, they will have 90 days to choose another income-driven repayment plan, or they will be moved into a standard plan.
Asked how he would respond to Americans who are concerned about higher monthly payments, Kent said, “The SAVE plan was just broad student loan forgiveness wrapped up in a different wrapping paper, and so to compare the plans is not fair. One is congressionally authorized.”
The Biden administration bypassed Congress to offer broader relief to Americans struggling with mounting debt, but critics argued the payments were artificially low at the expense of taxpayers.
New repayment plans
Two new repayment plans went live on July 1, part of the “Big Beautiful Bill” passed last summer by the Republican-led Congress.
Students who take on loans moving forward will be able to enroll in the Tiered Standard Plan or the Repayment Assistance Plan (RAP).
“There will be fewer repayment plans to confuse borrowers and easier repayment plans for borrowers to navigate,” Kent said.
Under RAP, a borrower’s monthly payment depends on their income and number of dependents. The plan also ensures that borrowers who make full, on-time monthly payments will be shielded from runaway interest.
Under the Tiered Standard Plan, borrowers will pay a fixed amount over the course of anywhere from 10 to 25 years based on their outstanding loan balance, giving those with higher debt lower monthly payments and more time to repay.
Click here to compare and contrast plans.
Temporary interest rate reduction
The Education Department is offering a temporary 1% interest rate reduction, beginning on July 1, for certain borrowers who enroll in autopay by September 30, 2026. It will remain in effect through June 30, 2028.
Borrowers who were already enrolled in autopay will also get the 1% discount, up from the 0.25% that they were previously receiving. This group does not need to take further action.
The discount will benefit borrowers whose Federal Direct Loans originated after July 1, 2012. Borrowers who are in default must consolidate their eligible loans and apply for a new repayment plan before enrolling in autopay.
Kent said the interest rate reduction is intended to incentivize borrowers to get back into active repayment and improve the health of the federal student loan portfolio, at a time when roughly 9 million are in default.
Borrowing caps
Another part of the “Big Beautiful Bill” that took effect on July 1 limits how much money parents of undergraduates and graduate students can borrow in the first place. There are higher caps for certain professional degrees, but that list is currently the subject of litigation.
- Parent PLUS loans limited to $20,000 per student annually, $65,000 per dependent student in total.
- Graduate students limited to $20,500 annually, $100,000 in total
- Professional students limited to $50,000 annually, $200,000 in total
Previously, federal loans covered the full cost of these programs. Some fear that these caps will make school unaffordable for students who can’t bridge the gap.
When asked about those concerns, Kent argued that these guardrails are necessary to curb excessive debt and put pressure on universities.
“These loan caps are putting downward pressure on institutions to lower their costs,” he said.
Shifting student loan services
All of these changes are happening as the Education Department is starting the process of shifting the federal student loan portfolio to the Treasury Department through an inter-agency partnership.
Kent said the Trump administration is still primarily focused on “phase one,” which includes shifting management of borrowers who are in default. He said some work on phases two and three has started, but he wouldn’t provide a timeline for when the transition will be complete.
Critics warn that the shift could cause more confusion for borrowers and that dismantling the Education Department could hurt services that students rely on.
“Services should not see a substantive change when it comes to their interactions with the department or their servicer as a result of this partnership,” Kent said. “If anything, they should see better customer service.”
