The One Big Beautiful Bill Act (OBBBA) is bringing a sweeping overhaul to the federal student loan system. While signed into law last year, its major structural shifts officially take effect on July 1, 2026.

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Whether you are a new student, currently paying off debt, or holding parent loans, these changes will fundamentally alter your repayment options and borrowing limits. Here is everything you need to know.

1. The New Repayment System

Starting July 1, 2026, the federal government is drastically narrowing its income-driven and standard repayment structures down to just two primary plans for future borrowing.

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Tiered Standard Plan

• How it works: Fixed monthly payments over a set timeline determined by your total balance.
• Duration: 10 to 25 years.
• Minimum Payment: $50 per month.

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Repayment Assistance Plan (RAP)

This is the new flagship Income-Driven Repayment (IDR) option.

• The Calculation: Your Adjusted Gross Income (AGI) determines a base payment percentage between 1% and 10%. From that monthly amount, you subtract $50 for every dependent you claim.
• Minimum Payment: $10 per month.
• Interest Subsidy: If your calculated monthly payment is too low to cover the interest your loan accrues, the government waives the rest. Your balance will not grow as long as you pay on time.
• Forgiveness: Any remaining balance is forgiven after 30 years of payments (this forgiveness is treated as taxable income).

RAP Estimated Monthly Payments (No Dependents)

Adjusted Gross Income (AGI)	Base Percentage	Monthly Payment Range
$10,000 or less	Flat Rate	$10.00
$10,001 – $20,000	1%	$10.00 – $16.67
$20,001 – $30,000	2%	$33.34 – $50.00
$30,001 – $40,000	3%	$75.00 – $100.00
$40,001 – $50,000	4%	$133.34 – $166.67
$50,001 – $60,000	5%	$208.34 – $250.00
$60,001 – $70,000	6%	$300.01 – $350.00
$70,001 – $80,000	7%	$408.34 – $466.67
$80,001 – $90,000	8%	$533.34 – $600.00
$90,001 – $100,000	9%	$675.01 – $750.00
$100,001 and up	10%	At least $833.33

2. New Borrowers vs. Existing Borrowers

The rules that apply to you depend entirely on when your loans are disbursed.

If you borrow or consolidate AFTER July 1, 2026:

You are legally categorized as a “new borrower.”

• Your only repayment options for Direct Loans are the Tiered Standard Plan or RAP.
• If you have old loans from before 2026, taking out a new loan or consolidating after July 1 automatically pulls all of your federal loans into the new system, permanently removing your access to legacy plans (like IBR or PAYE).

If ALL your loans were disbursed BEFORE July 1, 2026:

• You are grandfathered into legacy options. You can remain on or choose the standard Standard, Graduated, or Extended plans.
• You can still utilize Income-Based Repayment (IBR). You can also opt into the new RAP plan if you choose.
• Phase-Out Warning: Legacy plans like PAYE and ICR will be completely phased out by July 2028. If you are on them, you will eventually need to switch to IBR or RAP.

3. The Death of the SAVE Plan

The SAVE Plan has been completely eliminated.

• 90-Day Window: Servicers will begin notifying SAVE enrollees on July 1, 2026. You have 90 days to manually enroll in a new plan (such as RAP). Failure to do so results in automatic enrollment into a Standard or Tiered Standard plan.
• PSLF Impact: The months your loans spent in litigation-induced forbearance under the SAVE plan do not count toward Public Service Loan Forgiveness.
• The “Buyback” Loophole: You can retroactively buy back those lost months to count toward your 120 PSLF payments only if you are still actively working for a qualifying employer, have an outstanding balance, and those specific months will successfully trigger your final 120th payment.

4. Drastic New Loan Caps

The OBBBA introduces rigid annual, aggregate, and absolute lifetime caps on federal lending. (Note: Undergraduate loan limits remain unchanged).

Graduate & Professional Students

• Grad PLUS Eliminated: The Graduate PLUS loan program is cancelled for new borrowers. Graduate funding must now come entirely from Direct Unsubsidized loans or private lenders.
• Standard Graduate Programs (Master’s, MBA, PhD): Capped at $20,500 annually with a strict $100,000 aggregate limit.
• Professional Programs (Law, Med, Dental, Vet, etc.): Allowed up to $50,000 annually with a $200,000 aggregate limit.
• Part-Time Proration: If you are enrolled less than full-time, your annual federal loan limits will now be prorated dynamically based on your exact credit hours.

Parent PLUS Borrowers

• New Caps: Parents can no longer borrow up to the total cost of attendance. New Parent PLUS loans are capped at $20,000 per year per student, with an absolute lifetime limit of $65,000 per student.
• Repayment Restricting: New Parent PLUS loans are completely ineligible for RAP. They must be paid using the Tiered Standard Plan.

Absolute Lifetime Federal Cap

There is now an absolute, unbreakable lifetime federal loan maximum of $257,500 per borrower across all levels of study combined (undergraduate, graduate, and professional). Paying down your balance does not reset this cap.

Legacy Exception: If you are already enrolled in a graduate program and took out a federal loan before July 1, 2026, you can continue borrowing under the old caps and access Grad PLUS loans for up to three academic years (until June 2029) or until you graduate, whichever comes first.

Editing by katie willimas