A sweeping new law is about to overhaul the student loan system in the United States—and the changes are both significant and complicated. If you’re a student, parent, or recent graduate, it’s important to understand how this bill could affect your future borrowing and repayment options.
Here’s what you need to know about how and when these changes will take effect – and don’t forget to call our sponsor CareConnect USA’s Student Aid Hotline at 888-201-0431 if you need help understanding your options!
New Repayment Plans
Until July 1, 2026, existing repayment options like PAYE, REPAYE, IBR, and ICR remain available for borrowers with older loans.
Effective July 1, 2026, borrowers will need to pick one of two repayment options:
- Fixed Payments with terms ranging from 10-25 years. These monthly payments will be based on your total balance.
- Repayment Assistance Plan (RAP) is an income-driven plan where payments are baesd on your discretionary income. That’s a percentage of your income minus $50 per dependent. The minimum monthly payment is $10 and loan forgiveness is only available after 360 payments (30 years). These payments will also count toward PSLF, if you’re eligible for that. If your monthly RAP payment doesn’t fully cover your interest, interest may be waived.
By July 1, 2028, all borrowers in previous ICR plans will have to switch to one of these two plans. If you don’t choose, the government will automatically enroll you in one.
Deferment & Forbearance Changes
Starting July 1, 2027, both unemployment and hardship deferments will no longer be available for new loans.
Forbearance may be available, but it will be limited to 9 months within a 24-month period. You will have to meet very specific criteria in order to qualify.
However, there will be more opportunities to rehabilitate your loans. Rehabilitation is when you bring a loan out of default and make it current. Borrowers with defaulted loans will now be able to rehabilitate loans twice (previously, you only had one chance). However, for some newer loan types, you must make minimum $10 monthly payments during the rehab period.
Pell Grant Changes
Starting in 2026, families will need to include foreign income in their Pell Grant calculations—even if that income isn’t subject to U.S. tax. Also, students with a Student Aid Index (SAI) that is twice the Pell Grant amount will no longer be eligible for Pell Grants.
Beginning July 1, 2026, a new form of financial aid—the Workforce Pell Grant—will help fund short-term, career-focused training programs.
To qualify, you must:
- Be eligible for a traditional Pell Grant
- Not have or be pursuing a graduate degree
- Enroll in a non-degree program lasting 8–15 weeks
- Attend a program that leads to a recognized postsecondary credential, is aligned with a high-skill, high-wage or in-demand job, and is not a correspondence course.
These Workforce Pell Grants may open up more opportunities that were previously unavailable to low income students.
Limits on New Loans
Starting July 1, 2026, student loan borrowers will be subject to new annual and lifetime borrowing limits:
- Students will be able to borrow $20,500 per year or $100,000 over the course of their lifetime.
- Professional students will be able to borrow $50,000 per year or $200,000 over the course of their lifetime.
- Parents will also face tighter restrictions. Parent PLUS Loan Limits will be $20,000 per year or $65,000 over the course of their lifetime. The lifetime limit applies even if they repay the initial loan.
If you’re enrolled less than full time, your annual limit will be pro-rated accordingly.
If you’re already enrolled and borrowing before July 1, 2026, you may qualify for a temporary exception. This means you can continue borrowing under the current rules for up to three more years, or until you finish your current program, whichever comes first.
As of July 1, 2026, schools will be prohibited from using Direct Loans for any program that doesn’t demonstrate acceptable earnings potential. This is a major shift aimed at eliminating loans for programs that saddle students with debt but offer little return on investment.
This is probably also why colleges and universities will also have the authority to cap loan amounts for specific programs, especially if those programs have poor outcomes or low earnings potential.
Relief Recap
Major changes are coming to student loans—and planning ahead is key. Stay informed, know your options, and make decisions now that will protect your financial future later. Subscribe to Low Income Relief for updates!