What July 1st federal student loan changes mean for you
What July 1st brings is the biggest federal student loan reset in years: borrowing caps, just two repayment plans for new loans, and a 90-day deadline for roughly 7 million SAVE borrowers to pick the Repayment Assistance Plan or Tiered Standard plan—or face reassignment under rules reshaping how millions of Americans finance college.
Key Takeaways
- New federal student loans issued from July 1 offer only the Repayment Assistance Plan (RAP) or Tiered Standard repayment.
- Graduate borrowers face annual and lifetime caps; Parent PLUS loans are limited to $65,000 per child.
- About 7 million SAVE plan enrollees have 90 days to choose a new repayment option.
- A new federal earnings test will eventually cut loan eligibility from low-return college programs.
- Borrowers can compare monthly payments using the calculator at StudentAid.gov.
What July 1st changes hit borrowers first?
A major shakeup to the federal student loan system took effect July 1, affecting millions of borrowers nationwide, according to CNN. Some Americans—especially lower-income borrowers—could face higher monthly payments, while others will hit new borrowing limits.
One of the biggest shifts is the end of the Biden-era Saving on a Valuable Education (SAVE) plan. Roughly 7 million borrowers enrolled in SAVE now have 90 days to switch to the Repayment Assistance Plan or the Tiered Standard repayment plan. Going forward, new federal student loan borrowers may choose only those two options, which the Education Department says will simplify repayment.
For broader context on how policy shifts affect household finances, see our Net Worth & Wealth coverage.
How do the new borrowing limits work?
Graduate students pursuing master’s degrees may borrow up to $20,500 per year and $100,000 total, according to ABC7 Los Angeles. Professional students in fields such as law and medicine may borrow up to $50,000 annually and $200,000 over a lifetime. Most graduate borrowers cannot exceed $257,500 in total federal loans.
Parent PLUS loans, which previously allowed parents to borrow up to the full cost of attendance, now carry a $65,000 lifetime cap per child. Families and graduate students planning new loans should confirm limits with their school’s financial aid office before assuming prior rules still apply.
What is the new federal earnings test?
Alongside repayment and borrowing changes, the Education Department finalized a federal earnings accountability measure, as Inside Higher Ed reported. Undergraduate programs must prove graduates earn more than adults with only a high school diploma. Graduate programs must show graduates earn more than typical bachelor’s degree holders.
Programs that fail the test in at least two of three consecutive years lose access to federal student loans for the next two years. Undergraduate earnings are measured four years after graduates complete a program. Department data estimated roughly 825,000 students were enrolled in programs that would fail during the 2024–25 award year.
What should borrowers do right now?
SAVE enrollees should compare RAP and Tiered Standard payments using the Education Department’s repayment calculator on StudentAid.gov. The department says borrowers can apply for one of the two new plans on the site, and the application takes about 10 minutes to complete.
Anyone weighing a degree or certificate should also watch for new program-level disclosures tied to the earnings test. Institutions where failing programs dominate enrollment could, in rare cases, also face limits on Pell Grant eligibility.