Student loan borrowers can expect major changes after the passage of the “One Big Beautiful Bill Act,” signed into law on July 4th. In addition to a sprawling agenda that impacts dozens of sectors, the bill has enormous implications for the federal student loan system. It places limits on borrowing, eliminates a whole category of loans, and reduces the number of repayment plans to three. While much of the changes to federal loans will only impact future borrowers, those already in repayment will be subject to the new payment plan structure beginning July 1, 2026.
One of the most significant facets of this bill for students are limitations on federal borrowing. In addition, the Graduate PLUS Loan—which helps cover living expenses on top of graduate tuition—is being entirely eliminated. After July 1, 2026, students will have their lifetime borrowing capped at $257,500. There will also be caps placed on annual borrowing and the amount a student can borrow for graduate and professional programs. Graduate students will be capped at $20,500 per year, with a lifetime cap of $100,000. Professional program borrowers, such as med students, will be capped at $50,000 per year, with a lifetime cap of $200,000. Since the median price of medical school is well over that amount (not even factoring cost of living on top of that), experts predict that the existing physician shortage in this country will only worsen.
The bill’s biggest change to the student loan system is its sweeping revision of the repayment system. Instead of the current spread of payment plans from which borrowers can choose, there will just be three: a fixed plan and two income-based plans. The former will require a borrower to pay a fixed amount over a span of up to 30 years, depending on the original balance of the loan. Borrowers’ other main option is the newly-created Repayment Assistance Plan, which replaces the preceding income-driven repayment (IDR) plans (ICR, PAYE, and SAVE). Income-based Repayment (IBR) will still be available, however.
Under the RAP plan, borrowers would pay a percentage of their annual income—determined by their tax returns—based on their income bracket and divided over the 12 months of the year, up to 10% of their income each year for those earning $100k or more. Unlike the current IDR plans, however, this amount isn’t based on family size or discretionary income. This is based purely on your adjusted gross income (AGI), and there is no payment cap, which could lead to pricey payments. A resident physician earning $60k/year, for example, would pay about $300/month. An attending physician, on the other hand, earning $250k/year would pay about $2083/month.
Remember, these changes don’t take effect for another year. We are also in the midst of a negotiated rulemaking session, which recently concluded. Those new rules will be announced before November for public comment prior to implementation next July, as well. These changes are so new that even studentaid.gov hasn’t had time to announce anything. If you have questions or concerns about how this will impact your repayment, give us a call. We’ll keep you up-to-date with all the new changes and will make sure you’re on the best path for your student loan repayment journey.
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