The federal student loan system in the United States underwent a radical change starting July 1, with new rules affecting tens of millions of current and future borrowers, stemming from the law signed by President Donald Trump, known as the "great and beautiful bill."
The changes involve the end of several payment plans, new limits on loans for graduate studies, and severe restrictions on Parent PLUS loans, with a projected significant increase in monthly payments for millions of people.
"Above all, the affordability of monthly payments is a concern. I believe many will experience a significant increase in their payments, which means they will have to stretch their budgets significantly to manage it, or they simply won't be able to do so," warned Michele Zampini, associate vice president of The Institute for College Access & Success.
The context is one of crisis: approximately 9 million Americans are delinquent on their federal student loans since June, according to the Department of Education, on a total federal debt that exceeds $1.72 trillion.
The end of the SAVE plan
According to the AP, quoted by Telemundo 51, the most pressing change affects nearly seven and a half million borrowers enrolled in the SAVE plan (Save on a Valuable Education), established by the Biden administration in 2023 and overturned by the Eighth Circuit Court of Appeals in March.
The Department of Education has already started sending official notices: these borrowers have 90 days to enroll in another income-driven plan, or they will be automatically transferred to the standard plan, which has higher fees.
The notices are sent continuously, so there is no single deadline for everyone.
Current borrowers can choose from three income-based plans: the income-driven repayment plan, the repayment plan according to their income, and the conditional income repayment plan.
New limits for postgraduate studies
For those applying for loans starting July 1, graduate programs have a total limit of $100,000, while those classified as professional degrees—such as medicine, law, dentistry, and other fields—have a cap of $200,000.
Previously, graduate students could obtain federal loans that covered the total cost of their degree.
A court order from July 17 compelled the government to update its list of professional programs and temporarily restore eligibility for nursing and physical therapy, which had been excluded.
Restrictions on Parent PLUS Loans
Parent PLUS loans are limited to $20,000 per student and $65,000 per family. Those applying for this type of loan starting July 1 will not have access to any income-driven repayment plans.
"From now on, they will only have the standard payment option, and there will be no exceptions or safety net to adjust it based on income," Zampini noted.
Parent PLUS borrowers who consolidated their loans before July 1 will be able to use the income-driven repayment plan until June 30, 2028.
Options for new borrowers
Starting in July, those requesting loans will only have two plan options: the Payment Assistance Plan, which ranges from 1% to 10% of adjusted gross income with a minimum of $10 monthly, and the Tiered Standard Plan, which offers fixed payments ensuring the debt is settled within 10 to 25 years.
As a temporary measure, borrowers with active automatic payments will receive a reduction of 1% in their interest rate—down from the previous 0.25%—effective until June 2028.
To compare options based on each situation, the Department of Education recommends using the simulator available at StudentAid.gov, which already reflects the rules in effect since July 1.
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