Federal student loan borrowers now face a major shift under President Donald Trump’s latest legislative victory. Tucked into a $3.3 trillion budget reconciliation bill, the new law reshapes repayment options, sets borrowing caps, and ends several Obama- and Biden-era loan programs.
All federal student loan holders must transition to one of two new repayment plans by July 1, 2028. New borrowers starting July 1, 2026, will be subject to these rules from the outset. The reforms replace all current income-driven repayment plans—including the Biden-era SAVE plan—with either a Standard Repayment Plan or an income-based Repayment Assistance Plan.
The Standard Plan will stretch up to 25 years, with fixed payments based on loan amount. The Repayment Assistance Plan caps payments at 10% of income and includes a crucial protection: if monthly payments fall short of covering interest, the federal government will waive the unpaid interest. Borrowers making consistent payments will not see their balances grow. After 30 years, any remaining balance will be forgiven.
Borrowers using current plans have until mid-2028 to switch, or they will automatically be placed on the income-based option.
Graduate students also face new borrowing limits. The bill ends the GRAD Plus program and caps borrowing at $20,500 annually and $100,000 total. Professional degrees in law or medicine will be capped at $50,000 annually and $200,000 lifetime. Parent PLUS loans are now limited to $65,000 per student.
Borrowers with defaulted loans can now rehabilitate loans twice, a move aimed at encouraging long-term repayment. However, loans disbursed after July 1, 2027, will no longer allow deferment for economic hardship or unemployment.
The bill also introduces Workforce Pell Grants for short-term job training programs and addresses the Pell Grant funding gap. Republicans project the reforms will save taxpayers $278 billion by 2034.
As of early 2024, over 43 million Americans owed $1.5 trillion in federal student loans. With only half up to date on payments, the Trump administration is pushing structural reforms to end what many call a long-brewing crisis.
