Several changes to the federal student loan program will impact students and parents alike. It can be confusing to keep up with it all. Here are the critical updates you need to know.
TL;DR. Quick Overview
1) Repayment plans are getting simpler for new loans after July 1, 2026
You’ll pick from:
- Standard Repayment Plan or the new Repayment Assistance Plan (RAP). RAP is based on your income and has a repayment period of up to 30 years. Only new loans disbursed on or after July 1, 2026 are eligible.
What about today’s IDR plans (PAYE, ICR, SAVE, older IBR)?
They’re scheduled to be phased out by July 1, 2028. Which plans you can use between now and then depends on when you first borrowed loans.
2) The PLUS Loan is changing for parents and grad/professional students
- Parent PLUS for new loans after July 1, 2026 The new borrowing limit is $20,000 per year per dependent, with a total cap of $65,000 per student.
- Grad PLUS loans will be unavailable to new borrowers after July 1, 2026. There is a 3-year sunset provision for current borrowers.
3) Loan Forgiveness and taxes
- Public Service Loan Forgiveness (PSLF) remains unchanged.
- Most federal student loan forgiveness is tax-free through December 31, 2025. After that, many types of forgiveness may be taxable unless the law changes. Some programs, like Public Service Loan Forgiveness (PSLF), may still be tax-exempt. Be sure to learn about specific programs, such as Teacher Loan Forgiveness and Perkins Loan Cancellation, as they may have their own tax implications.
A Closer Look at the Changes to Federal Student Loans
Now let’s do a deeper dive into the changes impacting the federal student loan program and your options as a borrower.
New Repayment Plans
- A new repayment option called the RAP (Repayment Assistance Plan) is coming soon. If you take out new loans beginning July 1, 2026, you’ll choose between the Standard Repayment Plan or RAP. RAP payments are based on your income and family size. Monthly payments will be between 1% - 10% of your Adjusted Gross Income (AGI).
- Older income-driven plans such as PAYE, ICR, and SAVE will be phased out by July 1, 2028. Only IBR and RAP will remain, with eligibility depending on when you borrowed.
- Court orders in 2025 have limited the SAVE plan. Some features have been paused, and interest is now accruing again for the affected loans.
- Public Service Loan Forgiveness (PSLF) will continue. The Department of Education has finalized rules, effective July 1, 2026, under which RAP payments will count toward PSLF.
- If Congress does not make changes, most forgiven student debt will be taxable again for discharges on or after January 1, 2026.
New Loan Limits
- Parent PLUS loans will have an annual limit of $20,000 per dependent and a total limit of $65,000 per dependent for loans first taken out on or after July 1, 2026. However, if you already have Parent PLUS Loans, you can continue borrowing under the current loan limits for up to 3 additional academic years.
- Grad PLUS loans will no longer be available for new borrowers after July 1, 2026. Graduate students will instead use Direct Unsubsidized Loans.
- Effective July 1, 2026, annual loan limits for graduate students will be $20,500. Annual limits for professional students will be $50,000. The cumulative limit for graduate students is set at $100,000 and for professional students it is $200,000. Note: if you already have Direct Loans there will be a 3-year transitional period in which you can continue to borrow under existing loan limits.
- There is now a $257,500 lifetime borrowing limit on all federal student loans, excluding Parent PLUS Loans.
So how will all these changes affect you as a borrower? Let’s break it down by situation.
If you already have federal loans (no new loans after July 1, 2026)
- You will likely continue with your current repayment plans for now. By July 1, 2028, you’ll be moved to the new RAP unless you select IBR or standard repayment. Watch for updates from your loan servicer.
- If you are currently on the SAVE plan, be aware that court orders may limit or change your options. Keep records and check messages from your servicer regularly. If you’re pursuing PSLF, continue to certify your employment and payments; the new rules aim to keep PSLF functioning in 2026 and beyond.
- If your loan forgiveness might happen in 2026 or later (and you are not using PSLF or other exceptions), plan for possible tax impacts.
If you’ll borrow after July 1, 2026
You will have fewer plan choices—just Standard or RAP. This is simpler but offers less flexibility.
- Parents: With new PLUS loan limits, start planning early to cover any funding gaps. Look into scholarships, savings, and ensure your student receives as much aid as possible. Compare private loans and consider co-signing to get better terms. Check for state programs that help with student financing. Since RAP is not available for PLUS loans, you’ll need to use other strategies.
- Graduate students: Since Grad PLUS is ending, review your program’s costs and the new Direct Loan limits. Plan to cover any shortfall with savings, assistantships, or private loans.
If you have some loans now and plan to borrow more after July 1, 2026, RAP will be your only income-driven plan for new Direct Loans. Your older loans may keep their current repayment plans, but any new loans will use RAP. Before borrowing again, run the numbers and see if RAP fits your situation. This will help you make a smart decision about repayment.
What to do now (Edvisors’ quick plan)
- Make a timeline. Write down your current loans, interest rates, repayment plan, and any dates when you might borrow more.
- Do the math. Compare the cost you would pay under the Standard plan versus the cost of RAP once it becomes available. (If you are on SAVE now, pay attention to legal limits and watch for updates.)
- If you’re a parent or grad student for 2026–27 and beyond, plan for the new caps and look for scholarships, work-study, and school discounts.
- If you are working toward PSLF, keep your employment certification up to date. RAP should count, but keeping good records is your best tool.
- Consider taxes. If your loan forgiveness might happen in 2026 or later, talk to a tax professional about what it could mean for you.
FAQs
Will my payments go up right now?
Maybe not. However, court actions impacted the SAVE plan, and interest resumed for many SAVE borrowers in August 2025. Watch for updates from your servicer and plan your budget for possible changes.
Is RAP better than today’s plans?
It depends on your income, family size, and the length of your repayment plan. RAP is simpler and helps keep balances from growing too much, but it can take up to 30 years if you do not use PSLF. Do the math to see what works best for you.
What if I’m a parent borrower?
After July 1, 2026, new Parent PLUS loans face hard caps and won’t be eligible for RAP. Plan early to cover gaps with scholarships, savings, or private loans.
Is forgiveness still tax-free?
Most federal loan discharges are tax-free through December 31, 2025. After that, many types of forgiveness may be taxable unless the law changes.be taxable unless the law changes.
