Significant changes to student loan repayment plans and borrowing caps took effect on July 1. The new plans, part of the “Big Beautiful Bill” passed last summer, aim to simplify the repayment process and reduce debt for borrowers.

Repayment Plan Changes

Two new repayment plans are now available: the Tiered Standard Plan and the Repayment Assistance Plan (RAP). The Tiered Standard Plan allows borrowers to pay a fixed amount over 10 to 25 years based on their outstanding loan balance. The RAP plan ties monthly payments to a borrower’s income and number of dependents, shielding borrowers from excessive interest.

The Trump administration is also eliminating the Biden-era SAVE plan, which was struck down by a federal court earlier this year. Borrowers enrolled in the SAVE plan will be contacted in the coming weeks and will have 90 days to choose a new income-driven repayment plan or be moved to a standard plan.

Borrowing Caps

New borrowing caps are also in effect, limiting the amount of money parents of undergraduates and graduate students can borrow. Parent PLUS loans are now capped at $20,000 per student annually and $65,000 per dependent student in total. Graduate students are limited to $20,500 annually and $100,000 in total.

These changes aim to curb excessive debt and encourage responsible borrowing. However, some critics argue that the caps may make school unaffordable for students who cannot bridge the gap.

Temporary Interest Rate Reduction

The Education Department is offering a temporary 1% interest rate reduction for certain borrowers who enroll in autopay by September 30, 2026. This reduction will remain in effect through June 30, 2028, and is intended to incentivize borrowers to get back into active repayment.

Original reporting: WLKY Louisville — read the source article.