Trump Student Loan Overhaul Takes Effect, Caps Borrowing and Ends SAVE Plan

Effective July 1 2026, the federal student‑loan program was overhauled under the “One Big Beautiful Bill” signed by President Donald Trump. The Biden‑era SAVE income‑driven repayment plan was declared unconstitutional and will cease; about 7.5 million borrowers have 90 days to switch to a new plan. Two repayment options are now available: a Tiered Standard plan with fixed payments over 10‑25 years, and a Repayment Assistance Plan (RAP) that charges 1‑10 % of income with a $10 minimum and a $50 reduction per dependent.

New borrowing limits were introduced. Graduate and professional students may now borrow up to $100 000 (or $200 000 for certain professional degrees) in total, and Parent PLUS loans are capped at $20 000 per student and $65 000 per family. The Grad PLUS option is eliminated for many future graduate students. Interest rates rose to 6.52 % for undergraduate loans and 8.07 % for graduate loans.

Analysts estimate the changes could raise average annual payments by more than $4 000 per borrower and increase mortgage‑affordability pressure. Critics warn the tighter caps may exacerbate “summer melt,” especially at historically Black colleges and universities, potentially driving enrollment declines and staffing cuts.