New federal student-loan repayment plans and borrowing limits take effect nationwide
New federal student-loan repayment options, revised borrowing limits and a short-term workforce Pell grant program took effect nationwide July 1, changing the choices available to borrowers, prospective graduate students, parents and eligible workforce programs.
The changes implement provisions of the Working Families Tax Cuts Act and a final Education Department rule issued April 30, 2026. Most of the rule’s provisions were scheduled to begin July 1, while some rehabilitation, deferment and forbearance changes will not take effect until 2027.
Two repayment options for new borrowers
Beginning July 1, new federal student-loan borrowers can choose between the Repayment Assistance Plan and a Tiered Standard repayment plan, according to the Education Department.
The Tiered Standard plan uses fixed repayment terms based on the amount borrowed. Its repayment periods are 10, 15, 20 or 25 years. The packet does not establish that every borrower will receive a lower monthly payment; the effect will depend on the borrower’s loan type, enrollment date and eligibility.
The changes also affect access to older repayment plans. The Associated Press reported that some older plans will no longer be available to new borrowers. Certain older repayment plans are scheduled to sunset July 1, 2028, giving borrowers and institutions a later transition date for those provisions.
The Education Department finalized the rule after receiving more than 80,000 public comments on the proposal. The final rule implements the higher-education provisions of the Working Families Tax Cuts Act rather than merely outlining a proposal.
New limits for graduate and parent borrowing
The law eliminates new Grad PLUS borrowing and establishes separate annual limits of $20,500 for graduate students and $50,000 for professional students.
It also sets aggregate limits of $100,000 for graduate students and $200,000 for professional students. Parent PLUS borrowing is capped at $20,000 per dependent student each year and $65,000 per dependent student in total, subject to statutory exceptions.
The materials also identify a general lifetime aggregate loan limit of $257,500. The new caps are intended to change how students, parents and institutions plan for the cost of graduate and professional education, but the packet does not say that colleges must reduce tuition. The Education Department describes the policy as intended to put downward pressure on college costs.
Workforce Pell expands potential grant eligibility
Workforce Pell took effect as a new pathway for eligible short-term workforce programs to qualify for Pell grants. Programs as short as eight weeks may qualify, but they must receive the required state and federal approvals.
That means the provision does not make every short-term program eligible automatically, and the materials do not establish how many programs had received final approval by Aug. 8, 2026. Participation will depend on the program’s eligibility and completion of the approval process.
What happens next
Borrowers and prospective students will face different consequences depending on when they borrowed, what type of loan they hold, their enrollment status and whether they meet the applicable eligibility rules. The new repayment choices and borrowing limits are already in effect for the provisions scheduled for July 1, 2026.
Additional rehabilitation, deferment and forbearance provisions are scheduled to take effect July 1, 2027. Certain older repayment plans will sunset July 1, 2028. The Education Department and Federal Student Aid are responsible for carrying out the changes for federal borrowers and participating institutions across the United States.
As of the Education Department data cited by the Associated Press, roughly 9 million federal borrowers were in default in June. That figure provides context for the scale of the federal loan system, but the approved materials do not quantify how many borrowers will select each new plan or how the new rules will change default rates.
Sources
- Fact Sheet: The Trump Administration is Making Higher Education More Affordable, Expanding Opportunity, and Simplifying Student Loan Repayment, U.S. Department of Education
- U.S. Department of Education Finalizes Landmark Rule to Lower College Costs and Simplify Student Loan Repayment, U.S. Department of Education
- Changes to student loans are taking effect July 1. Here's what to know, Associated Press
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