- Federal student loan rules are about to change from July 1.
- About 7.5 million borrowers enrolled in SAVE will receive notices to move to a new repayment plan.
- The new rules are expected to limit student loan debt in the US
Rules for federal student loans are set to change from July 1, limiting how much Americans can borrow and their repayment options. The changes are a result of the One Big Beautiful Bill, signed into law by US President Donald Trump last year.
The Education Department has stated the new rules are a way to streamline the student loan system, which currently has seven repayment plans, as per CBS. The new rules are also expected to limit student loan debt, which is almost $1.9 trillion at present, according to LendingTree.
Apart from that, borrowers who had enrolled in the Biden administration's Saving on a Valuable Education (SAVE) plan are also facing a major change as the Trump administration moves to shut the program and move borrowers into new repayment options.
Borrowers in the SAVE plan may be moved automatically into either the new Tiered Standard plan or Standard Repayment Plan if they do not choose a new repayment option within the 90-day window provided by their loan servicer, the Education Department said in a notice.
Before the new rule changes come into effect on July 1, here are five things student borrowers must do:
1. Check repayment plan: Borrowers must visit studentaid.gov and check what plan they are in and which repayment options are still open to them. Borrowers could qualify for some plan right now that won't be available later. Waiting might narrow their options.
2. Check new repayment plan if you are in SAVE: About 7.5 million borrowers enrolled in SAVE will receive notices around July 1 by their loan servicers to move to a new payment plan. As the standard plan could lead to higher repayments, borrowers should explore and apply for more income-driven plans before the deadline.
3. Some repayment options are closing: PAYE and ICR will not be available for loans disbursed on or after July 1, as per USA Today. Both plans will be phased out completely by July 1, 2028. 2028. Existing borrowers with older loans can still keep the options for now and switch later.
4. Fewer choices for new borrowers: From July 1, borrowers who opt for a new student loan will only have two repayment options - the Repayment Assistance Plan, or RAP, and the Tiered Standard Plan.
Borrowers with earlier loans who take out a new loan after July 1 will also have only two options.
5. Parent PLUS rule change: The scheme allows parents to take out loans for their child's undergraduate degree. Earlier, they could borrow up to the cost of attendance. Now, caps of $20,000 a year and $65,000 total per student have been introduced.
Borrowers must consolidate the loans into a Direct Consolidation Loan before the deadline to stay eligible for income-driven repayment programs like Public Service Loan Forgiveness.
