Student Loan Reform:
What Borrowers Need to Know
As of July 2025, major changes are reshaping the landscape of federal student loans. Whether you’re repaying debt or planning for upcoming higher education costs, staying informed is crucial. From legislative overhauls to interest changes, here’s what you need to know right now.
Key Highlights
- Major student loan reform bill signed into law: The One Big Beautiful Bill Act (OBBBA)
- Income-driven repayment (IDR) forgiveness temporarily paused
- Interest resumes for SAVE plan borrowers on August 1, 2025
- Federal borrowing caps added for graduate and professional students
- New repayment options go into effect in 2026, with required changes by 2028
1. A New Era for Student Loans: OBBBA
On July 4, 2025, sweeping legislation known as the One Big Beautiful Bill Act (OBBBA) was signed into law. This bill simplifies federal student loan options and limits how much students can borrow for graduate and professional programs.
Here’s what’s changing:
- All existing income-driven plans (like SAVE, REPAYE, PAYE) will be replaced by just two options:
- A standard 10-year plan
- A new Repayment Assistance Plan (RAP), designed to adjust payments based on income over a 30-year timeline
These new plans will go into effect July 1, 2026, and all existing borrowers will need to switch by July 1, 2028.
2. Forgiveness Under IBR & SAVE: Paused for Now
If you’ve been working toward student loan forgiveness through an income-driven repayment plan like IBR or SAVE, you may be affected by a temporary pause in loan discharge processing. This pause, announced in mid-2025, is meant to allow for audits of qualifying payments—impacting nearly 2 million borrowers.
While this doesn’t mean forgiveness is off the table, the process is delayed. Borrowers are encouraged to continue making qualifying payments to preserve their forgiveness eligibility when it resumes.
3. SAVE Plan Borrowers: Interest Resumes August 1
For those enrolled in the SAVE plan, a major change is just days away. As of August 1, 2025, the interest subsidy that kept payments low (or zero) for many will expire. Millions of borrowers could see their monthly payments double as interest begins to accrue again.
If you’re currently on the SAVE plan and unable to pay more than the interest, consider reviewing your options—especially as new plans roll out in 2026.
4. New Federal Loan Limits for Graduate & Professional Students
Under the new law, there are now caps on how much students can borrow at the federal level:
Program Type |
Annual Cap |
Lifetime Cap |
Graduate Programs |
$20,500/year |
$100,000 total |
Law/Medical/Dental/Vet |
$50,000/year |
$200,000 total |
Parent Loans |
N/A |
$65,000 total |
Previously unlimited loans like Grad PLUS and Parent PLUS will be phased out under these reforms. Students pursuing advanced degrees may now need to explore private lending, scholarships, or school payment plans to fill the gap.
5. What Borrowers Should Do Now
Here are steps you can take in light of these changes:
- SAVE plan participants: Prepare for interest charges starting August 1.
- Borrowers nearing forgiveness: Stay on your current plan, keep making payments, and document your records.
- Graduate-bound students: Review how new borrowing limits could impact your funding options.
- Everyone: Pay attention to the rollout of RAP and new plan requirements by 2026 and 2028.
Final Thoughts
Student loan policy is changing—fast. These shifts will affect how students finance education, how families plan for college, and how borrowers manage repayment for decades to come. If you have questions or need help understanding how these changes affect your plan, don’t hesitate to reach out.