Student loans since July 2026: new borrowing caps, no new Grad PLUS loans and a new repayment plan

On May 1, 2026, the U.S. Department of Education published final regulations in the Federal Register that carry out the student loan changes in Public Law 119-21, signed on July 4, 2025, which the department calls the Working Families Tax Cuts Act. The rule took effect on July 1, 2026, for federal student loan borrowers across the United States. It caps how much graduate students, professional students and parents can borrow, ends new Grad PLUS loans, and narrows repayment for new loans to two plans: a fixed-payment Tiered Standard plan and a new income-driven Repayment Assistance Plan.

What came before

Until July 1, 2026, graduate and professional students, and parents of dependent undergraduates, could take out Direct PLUS loans up to the cost of attendance minus other aid. Borrowers repaying loans could choose among several plans, including income-driven plans that, according to the department, generally forgave remaining balances after 20 or 25 years and allowed $0 payments for people whose income fell below an exempt level. The SAVE plan could have forgiven some balances after as little as 10 years, but the department notes that a 2024 federal appeals court decision barred it from carrying out that plan.

The department wrote the rule with a negotiated rulemaking committee of schools, borrowers, states, servicers and consumer groups, which met from September 29 to October 3 and on November 3-6, 2025, and reached consensus on the whole text. A proposed rule followed on January 30, 2026.

The new borrowing limits

Annual limits for undergraduate students are unchanged, and annual amounts are reduced for students enrolled less than full time. The Parent PLUS total counts all such loans a parent has taken for that student, including those borrowed before July 1, 2026, and amounts repaid or forgiven still count. Schools may also set lower limits for specific programs.

Students already enrolled in a program on June 30, 2026, who had a Direct Loan made for that program before July 1, 2026, keep the old rules for a limited time: the lesser of three academic years or the time left in their program. The same applies to their parents' PLUS loans. The department notes that some part-time students may have no time left under that formula, and that anyone who withdraws or starts a new program falls under the new limits.

Two repayment plans for new loans

Loans made on or after July 1, 2026, can be repaid only under the Tiered Standard plan or the Repayment Assistance Plan. Under Tiered Standard, payments are fixed and at least $50 a month, and the repayment period depends on the total owed when repayment starts: 10 years below $25,000, 15 years from $25,000, 20 years from $50,000 and 25 years from $100,000.

Under the Repayment Assistance Plan, a borrower's yearly base payment is $120 for adjusted gross income of $10,000 or less, and otherwise a share of that income, rising one percentage point for each $10,000 band from 1% above $10,000 to 10% above $100,000. The monthly payment is the base payment divided by 12, minus $50 for each dependent, but it is never less than $10, except for a final payment. When a payment is on time, the department does not charge any interest it leaves uncovered. If an on-time payment cuts the principal by less than $50, the department reduces the principal further, so that it falls by $50 or by the amount of the payment, whichever is less. Any remaining balance is forgiven after 360 qualifying monthly payments over at least 30 years, and payments under the plan count toward Public Service Loan Forgiveness.

Borrowers with older loans can also use the Repayment Assistance Plan, except for Parent PLUS loans and some consolidation loans that repaid them. Those repaying under REPAYE (SAVE), PAYE or ICR must move to the Repayment Assistance Plan, Income-Based Repayment or a standard, graduated or extended plan before July 1, 2028. Borrowers who take out no new loans keep access to Income-Based Repayment.

Defaults, deferments and forbearance

From July 1, 2027, borrowers in default can rehabilitate each loan up to twice instead of once, and the minimum monthly payment to rehabilitate a defaulted Direct Loan rises to $10 from $5. For loans made on or after that date, the law removes the economic hardship and unemployment deferments, and forbearance is limited to nine months in any 24-month period, where earlier policy allowed 12-month forbearances for up to three years.

The arguments over the rule

Public comments split. Some commenters said the graduate and professional limits were adequate for most students and argued that without them tuition would keep rising. Others said the caps were out of step with the cost of many health and education programs and would leave large gaps. Many objected that programs such as graduate nursing, physical therapy, physician assistant and social work were not classed as professional degrees. The department replied that the law did not let it weigh concerns such as a greater reliance on private loans or pressure on the nursing pipeline when deciding which programs qualify.

The department estimated a net budget impact of minus $409.3 billion for loan cohorts from 1994 to 2035, compared with the President's budget baseline, for all provisions except the professional student definition. It said the rule would bring simpler repayment and lower costs for taxpayers. It also acknowledged that monthly payments under the Repayment Assistance Plan would be higher for all borrowers than under SAVE's terms, that some low-income borrowers would pay more than under any earlier income-driven plan, and that forgiveness would be less generous, partly offset by the interest and principal help.

What applies now

The rule has been in force since July 1, 2026. On November 12, 2026, the government's electronic Code of Federal Regulations showed the sections on borrower eligibility, loan limits, forbearance and repayment plans last amended with effect from that date. A Federal Register search the same day found one later Education Department rule affecting the same loan regulations: an earnings accountability rule for programs, published on July 1, 2026. Most of it takes effect on July 1, 2027, but its two changes to the Direct Loan regulations took effect on August 31, 2026: they added definitions of two kinds of programs and revised the section on schools' agreements to take part in Direct Loans. Neither changed the graduate and professional student definitions, the loan limits or the repayment plans described here.

The department said it planned to update the Tiered Standard plan's terms and conditions, and estimates of its monthly payments, on StudentAid.gov. A borrower's own limits, plan options and deadlines are for Federal Student Aid, the department's student aid office, and the borrower's loan servicer to confirm.