Millions of current and future student loan borrowers are facing the biggest overhaul of the federal student loan system in years, as major provisions of President Donald Trump’s One Big Beautiful Bill took effect July 1.

The changes dramatically reshape how students borrow money for college and how they repay it, replacing many existing repayment programs with a simplified system and reducing payments.

But the changes also imposing tighter borrowing limits on current and future graduate students and parents.

The Department of Education says the reforms are designed to simplify repayment, reduce runaway loan balances, and encourage responsible borrowing.

Consumer advocates counter that many borrowers—particularly low-income students and graduate students—could face higher monthly payments, longer repayment periods, and increased reliance on private loans.

It is unclear if the changes will fix the student loan crisis.

About 43 million Americans owe $1.8 trillion in debt and the federal portion amounts to $1.7 trillion. About 25% of federal borrowers are significantly delinquent in their payments.

Here are the key changes beginning July 1:

• New Repayment Assistance Plan (RAP) becomes available as the primary income-driven repayment option.
• New Tiered Standard Repayment Plan replaces traditional repayment choices for new borrowers.
• SAVE repayment plan officially ends, requiring millions of borrowers to transition to another plan.
• Graduate PLUS loans are eliminated for students beginning new graduate or professional programs.
• New federal borrowing caps are imposed on graduate, professional, and Parent PLUS loans.
• Lifetime federal borrowing limit of $257,500 established for most borrowers.
• New borrowers generally have only two repayment choices: RAP or the Tiered Standard Plan.
• PAYE and Income-Contingent Repayment (ICR) remain temporarily available for existing borrowers but will be phased out in 2028.

The changes stem from the One Big Beautiful Bill and apply differently depending on whether borrowers already have federal loans or take out new loans after July 1.

RAP Becomes Centerpiece

The biggest change is the launch of the Repayment Assistance Plan (RAP), a new income-driven repayment program available for most Direct Loan borrowers.

Under RAP:

• Monthly payments generally range from 1% to 10% of adjusted gross income.
• Borrowers receive a $50 monthly deduction per dependent when calculating payments.
• Every borrower pays at least $10 per month.
• Any unpaid monthly interest is waived, preventing loan balances from growing.
• If payments fail to reduce principal by at least $50, the federal government can reduce principal by up to $50 each month.
• Remaining balances become eligible for forgiveness after 30 years of repayment.
• Payments continue counting toward Public Service Loan Forgiveness (PSLF) for eligible borrowers.

Education Department officials touted strong early interest, announcing that roughly 46,000 borrowers submitted RAP applications during the program's first day.

Perhaps the most immediate impact falls on the estimated 7.5 million borrowers enrolled in the Biden administration's SAVE repayment plan.

Student loan servicers have begun sending notices informing borrowers they generally have 90 days after notification to choose a new repayment option. Those who fail to act could eventually be moved into more expensive repayment plans.

Borrowing Limits Tightened

The legislation also significantly limits future borrowing.

Graduate students are now generally limited to:

• $20,500 annually
• $100,000 total lifetime

Professional students—including many law and medical students—may borrow:

• $50,000 annually
• $200,000 lifetime

Meanwhile, Parent PLUS loans, which previously could cover the full cost of attendance, are now capped at:

• $20,000 per child each year
• $65,000 total per child

A lifetime federal student loan borrowing limit of $257,500 also applies to most borrowers, excluding Parent PLUS loans.

Supporters: Simpler, Less Debt

Supporters argue the overhaul restores fiscal discipline after years of expanding loan forgiveness programs.

The Trump administration says RAP prevents balances from ballooning through unpaid interest while simplifying a repayment system critics argued had become overly complicated.

Administration officials have also argued that new borrowing caps could discourage excessive student debt and place greater pressure on colleges to control tuition costs.

Consumer advocates, however, say many borrowers could pay substantially more each month than under previous income-driven plans.

The National Consumer Law Center, Protect Borrowers, and other advocacy organizations argue RAP's required minimum payment and longer 30-year forgiveness timeline may increase financial burdens for lower-income borrowers.

They also warn that eliminating Grad PLUS loans and imposing new federal borrowing caps could force more students into higher-cost private loans or discourage some from pursuing graduate education altogether.

Financial aid experts are encouraging borrowers—particularly those currently enrolled in SAVE—to carefully compare repayment options before switching plans.

For many existing borrowers, current repayment plans remain available for now, although several legacy programs are scheduled to sunset by 2028.

But for anyone taking out new federal student loans after July 1, the new repayment system established under Trump's One Big Beautiful Bill is now largely the only path forward.