4 Things to Know About the July Student Loan Changes

We are just a few weeks away from some of the most significant changes to federal student loan programs in a generation.On July 1, 2026, major new laws and regulations take effect that will impact nearly every part of the borrower experience, from loan origination to repayment and even student loan forgiveness.The changes are the result of a confluence of events.New regulations to implement the One Big Beautiful Bill Act, Republican-led legislation signed by President Trump into law last year, go into effect in July.

The Saving on a Valuable Education (SAVE) plan will begin getting phased out in July, following court approval of a settlement agreement between the Trump administration and several GOP-led states that had sued to block the program.And the Education Department is set to implement additional new regulations that impact other programs, such as Public Service Loan Forgiveness (PSLF).Here’s a breakdown of some of the biggest student loan changes that will take effect in July, and what borrowers should know.SAVE plan borrowers must switch repayment plans After two years of limbo, more than seven million borrowers with student loans in the SAVE plan will soon need to change to a different plan.

Starting on July 1, 2026, the Education Department and its contracted student loan servicers will begin sending out notices to borrowers, giving them 90 days to select a different repayment plan.If they don’t, the department will force them into a standard plan at the end of that 90-day window.Standard plan payments may be unaffordable for many borrowers and won’t count toward student loan forgiveness, including for PSLF in most cases.“Beginning on July 1, 2026, servicers will start sending communications to SAVE borrowers.

Once borrowers receive that email, they will have 90 days from the receipt of that email to switch into a different payment plan—so borrowers will need to switch starting before late September,” explained Protect Borrowers in a blog post last month.“If a borrower does not switch plans by then, ED will automatically place them in the current standard plan or the new tiered standard plan.” Currently, borrowers who want to remain in an income-driven repayment (IDR) plan can select the Income-Contingent Repayment (ICR), Income-Based Repayment (IBR) or Pay As You Earn (PAYE) plans, depending on their eligibility.ICR and PAYE are getting phased out as well, but not until 2028.Starting this July, borrowers will have another potential IDR option, the Repayment Assistance Plan (RAP).

But in many cases, borrowers will have higher monthly payments under all of these plans than they did under SAVE.A new student loan repayment plan called RAP is coming Starting on July 1, 2026, the Education Department will launch a new income-driven repayment (IDR) option called the RAP.Like all IDR plans, RAP will use a formula based on the borrower’s income and family size to determine the monthly payment amount, with the possibility of student loan forgiveness after many years in repayment.The new plan will have some important benefits, but also some significant drawbacks.  Here's how RAP compares: Payment formula: RAP uses a different formula than other IDR plans.

In most cases, RAP will be more affordable than IBR, but not as affordable as PAYE or SAVE.  Low-income or no-income earners: RAP may not be ideal for low-income or no-income earners, as RAP will require a minimum payment of at least $10 per month (the other IDR plans allow for $0 payments for borrowers earning below 150% of 100% of the federal poverty limit).  Higher income earners: RAP also may not be great for higher income earners, as RAP does not cap payments (while IBR and PAYE do).  Interest subsidy: RAP will waive any excess interest that accrues beyond a borrower’s minimum required monthly payment.Principal benefit: RAP will direct up to $50 of a borrower’s payment toward principal, even if they are not covering all of their interest.Taken together, those last two benefits mean that under RAP, federal student loan balances shouldn’t increase over time, and may actually gradually go down.But for non-PSLF borrowers, RAP will have a 30-year repayment term before a borrower can qualify for student loan forgiveness, which is far longer than the 20- and 25-year terms available under other plans.

Payments under RAP will count toward PSLF, but they will not count toward student loan forgiveness under other IDR plans (i.e., if a borrower enrolls in RAP and subsequently switches to IBR).  Repayment restrictions for new borrowers start July 1, 2026 July 1, 2026, will also serve as an important cutoff between legacy borrowers and “new” borrowers, who will have much more limited repayment plan options for their federal student loans.Anyone who consolidates their federal student loans, or takes out a new federal loan, on or after July 1, 2026, will lose access to all of the current repayment plan options, including IDR plans like IBR and PAYE, as well as legacy fixed repayment plans like the 10-year Standard Repayment Plan, the Extended Repayment Plan and the Graduated Repayment Plan.  The only repayment options for post-July 1 borrowers would be either RAP or a new Tiered Standard Repayment plan for their entire federal student loan balance.“Borrowers that take on any new loan — including borrowers that consolidate an existing federal loan —on or after July 1, 2026 will only be eligible for two repayment plans: the standard repayment plan or the RAP plan,” said the National Consumer Law Center in a July 2025 blog post summarizing the changes under the One Big Beautiful Bill Act.The restrictions apply to your entire loan balance It’s important for borrowers to understand that the limitations on repayment plan options for post-July 1 loans apply to the borrower’s entire federal student loan balance, including their older loans.

So, a borrower who is currently in repayment on their federal student loans under, say, the IBR plan, and who takes out a new federal student loan on or after July 1, 2026, will eventually be kicked off IBR, and they will have to enroll in either RAP or the Tiered Standard plan.“When the post-July 1, 2026, loan enters repayment, your pre-July 1, 2026, loans must be repaid under either the Repayment Assistance Plan (RAP) or the Tiered Standard Plan, along with the new loan,” explained the Education Department in online guidance updated in early June 2026.“You’ll lose access to the IBR, ICR, and PAYE plans even if your pre-July 1, 2026, loans previously were enrolled in any of those plans.You must either select RAP or the Tiered Standard Plan to repay all of your loans.

If you don’t select one of those plans, then your loan servicer will enroll all of your loans in the Tiered Standard Plan.” New PSLF rules could restrict student loan forgiveness in July 2026 The Education Department is also plowing ahead with a separate set of new rules that, once enacted on July 1, 2026, could restrict student loan forgiveness under PSLF.The regulations, intended to implement an executive order signed by President Trump in 2025, would allow the Secretary of Education to disqualify employers from being eligible for PSLF if they engage in activities that have a “substantial illegal purpose.” The department has argued that the new regulations are vital to ensure the integrity of PSLF.Critics, however, have argued that the new rules would allow the department to target nonprofit organizations and Democratic-led state and city governments that engage in lawful conduct that the administration simply doesn’t like, such as refusing to cooperate with federal immigration enforcement actions or maintaining diversity, equity and inclusion (DEI) programs.They note that individual borrowers would have no recourse if their employer is disqualified from PSLF under the new regulations, and the Education Department concedes that such borrowers would need to find new employment if they want to continue pursuing student loan forgiveness under PSLF.

A broad group of organizations has filed multiple legal challenges to try to block the new PSLF rules before they take effect.At least two of those lawsuits have reached the summary judgment stage, with key court hearings held in early June 2026..But so far, there have been no final rulings, and the proposed restrictions on student loan forgiveness under PSLF are currently poised to take effect in July.