What Are the New Student Loan Rules for 2026?

If you have federal student loans, plan to borrow this year, or are helping a child pay for college, 2026 is the year the rules changed. It is the biggest overhaul of federal student lending in decades. Repayment plans have been replaced, graduate borrowing is capped, the SAVE plan is being shut down, and several court fights are still open.

This guide covers what changed on July 1, 2026, what is happening right now, and what to do about it. It reflects the situation as of late September 2026, and some details may shift as courts and the Department of Education act.

The Quick Summary

• The changes come from the One Big Beautiful Bill Act, signed in 2025, and took effect for new borrowers on July 1, 2026. American Bar Association
• A new income-driven plan, the Repayment Assistance Plan (RAP), and a Tiered Standard plan are now available.
• Grad PLUS loans are gone for new borrowers, and new federal borrowing caps apply.
• Parent PLUS loans now have annual and lifetime limits.
• SAVE is over. Borrowers are being moved off it in waves, and the first 90-day deadline lands on September 29, 2026.
• Borrowers who enroll in auto pay by September 30, 2026 (or already have) get a 1 percent interest rate reduction through June 30, 2028. U.S. Department of Education
• Wage garnishment and tax refund seizures for defaulted loans are paused, but that pause is temporary.

Why the Rules Changed

For years, student loan repayment has been confusing. The Department of Education says more than 40 repayment and discharge options existed, and 70 percent of borrowers reported feeling overwhelmed. Congress responded in the 2025 budget law, which the administration now calls the Working Families Tax Cuts Act. It replaced the patchwork of income-driven plans with a much smaller menu and put hard limits on how much students and parents can borrow. U.S. Department of Education

Supporters say the changes simplify repayment and limit runaway borrowing. Critics say they will push graduate students and families toward private lenders and make some careers harder to afford. Both sides have a point, and the details matter.

The New Repayment Plans

The Repayment Assistance Plan (RAP)

RAP is the new income-driven plan. Monthly payments run between 1 and 10 percent of income, reduced by $50 per month for each dependent. Another source notes the plan sets a flat $10 monthly payment for borrowers earning under $10,000, and payments are based on adjusted gross income, so they don’t depend on how much you owe. U.S. Department of EducationTcnj

RAP has two features aimed at ending “runaway interest.” If you make an on-time payment, the government waives any unpaid monthly interest. If your payment doesn’t reduce your principal by at least $50, the Department adds a matching payment of up to $50. In theory, your balance should shrink every month you pay on time. U.S. Department of Education

The Department’s own example: a borrower with $35,000 in debt earning $45,000 paid $176 a month under older plans, versus $150 under RAP, plus interest waived and a principal match. That is the best-case picture from the government. Other analysts note that RAP payments may be higher than under some existing plans like PAYE and IBR. Whether RAP helps you depends on your income, family size, and balance. U.S. Department of EducationAmerican Bar Association

There is also a forgiveness backstop. Borrowers with a remaining balance after 360 on-time monthly payments (30 years) can have it discharged. U.S. Department of Education

The Tiered Standard Plan

This is the replacement for the old one-size-fits-all 10-year plan. Loan terms are set at 10, 15, 20, or 25 years depending on how much you borrowed. Larger balances get longer terms and lower monthly payments. The Department’s example: a $30,000 balance would cost $341 a month on the old 10-year plan, but $262 on a 15-year tier. The trade-off is more interest over time. U.S. Department of EducationU.S. Department of Education

Which Rules Apply to You?

Your situation depends on when you borrowed.

If you borrowed only before July 1, 2026 and take no new loans: you keep most of your options. Borrowers with no new loans after July 1, 2026 can stay in the standard, graduated, extended, and Income-Based Repayment (IBR) plans, and can also opt into RAP. You would not be eligible for the new tiered standard plan. Key Changes to Federal Student Loans Made in the One Big Beautiful Bill Act | University Student Financial Services +2

If you borrow any new loan on or after July 1, 2026: you are limited to two options. The only repayment plans available for all your loans, including older ones, will be RAP and the new Tiered Standard plan. Think carefully before taking a new federal loan if you rely on IBR, since it can cost you access to that plan. City of New York

If you are on PAYE or ICR: these plans are being phased out, and you must move to another plan by July 1, 2028. CBS News

Forbearance is tighter for new borrowers. For loans taken out on or after July 1, 2026, you can use only 9 months of forbearance in a 2-year period. PHEAA

The SAVE Plan Deadline Is Almost Here

SAVE was the Biden-era plan that let millions of borrowers pay very little, often $0. It was tied up in court for two years and is now finished. The plan was blocked by a federal court in 2025, and the Department spent 2026 winding it down. Since July 1, servicers have been sending formal notices that start a 90-day countdown to choose a new plan. Money Under 30

The key points:

1. Your deadline is personal. Your 90 days start on the date you received your notice, not on a single nationwide date. Money Under 30
2. September 29 is the earliest deadline. The Department has said no borrower must leave SAVE before September 29, 2026 at the earliest. Roughly 75 percent of the 7.5 million affected borrowers had been notified by early September, with the rest due by year-end. Student Loan PlannerMoney Under 30
3. Doing nothing has consequences. If you don’t submit a repayment application in your window, you are placed on the Standard plan or the new Tiered Standard plan. Borrowers who want income-based payments must apply for one, because it won’t happen automatically. For someone used to a $0 bill, that can be a shock. The first bill under the new plan typically arrives in October or November. The College InvestorThe Money Overview
4. Speed up your application. Giving the Department consent to pull your tax information directly from the IRS processes income-driven applications faster and allows automatic recertification. The College Investor

Check your servicer account (Nelnet, MOHELA, Edfinancial, and others) to find your exact date. The application is done at StudentAid.gov and takes about 10 minutes. Never pay anyone for help with federal loans. Applying is free. U.S. Department of Education

The 1% Auto Pay Discount Expires September 30

Auto pay normally takes 0.25% off your interest rate. For a limited time it is bigger. Borrowers who enroll by September 30, 2026, or who are already enrolled, receive a 1 percent reduction through June 30, 2028. That is a cheap way to save money, but make sure the automatic withdrawal fits your budget so you avoid overdrafts. U.S. Department of Education

New Borrowing Limits: The End of Grad PLUS

This is the change that will hit new students hardest.

Graduate students. Grad PLUS loans, which had existed for 20 years, ended on July 1, 2026 for new borrowers. Under the old system you could borrow up to your school’s full cost of attendance. Now: Saving For College

• Graduate programs: Direct Unsubsidized Loans are limited to $20,500 per year and $100,000 total for the degree. Columbia University Student Financial Services
• Professional programs: up to $50,000 per year with a $200,000 lifetime limit. Columbia University Student Financial Services

All federal Direct loans also operate under a $257,500 lifetime cap across all levels of study, excluding Parent PLUS loans. Eciks

Prorated limits. Annual loan eligibility now scales with credit load. Your annual limit is multiplied by the percentage of a full-time load you take. Part-time students may see smaller loan offers than before. Columbia University Student Financial Services

Grandfathering. Some current students are protected. Continuing borrowers who had a federal loan disbursed before June 30, 2026 and stay in the same program at the same school may keep using the old rules, including Grad PLUS, for three additional school years. Taking a leave of absence, transferring, or changing programs can put that protection at risk, so talk to your financial aid office before making changes. Credible

Parent PLUS. For the first time, there are limits. Parent PLUS loans are capped at $20,000 per student per year, with a $65,000 lifetime limit per student. Parents already borrowing for a student before July 1 can continue under the old limits for up to three more years or until the student’s program ends. Families who used to cover the entire gap with Parent PLUS may need scholarships, savings, a cheaper school, or private loans. Columbia University Student Financial ServicesDartmouth

The “Professional Degree” Fight

The higher $50,000/$200,000 tier only applies to “professional” programs, and who counts is being fought over in court. The Department’s RISE final rule, published May 1, 2026, restricted the professional category to 11 fields. That excluded programs like nursing, physician assistant studies, physical therapy, and social work. Saving For College

Then came a court ruling. On June 24, a federal district court in D.C. issued an order preliminarily setting aside and staying certain aspects of the definition while the case is decided on its merits. On June 29, the Department issued an interim list that treats a wider set of programs, including nursing, as professional. The Department says it still considers its definition lawful and will keep defending it. A third lawsuit was filed in August. ED: Professional Degree Programs Interim List to Include Nursing and More +2

If you are entering nursing, PT, OT, PA, or a similar program, check with your school about how it is currently classifying your degree. The answer could change with a court decision.

Interest Rates for 2026-27

Federal loan rates reset every July 1 and stay fixed for the life of the loan. For 2026-27 they are 6.52% for undergraduate Direct loans, 8.07% for graduate loans, and 9.07% for Parent PLUS loans. Parent PLUS loans also carry a 4.228% origination fee. That fee is why some families find private loans cheaper, especially with strong credit or a cosigner. Compare quotes before you accept a Parent PLUS offer. CollegeHelpGuideThe College Investor

Defaulted Loans: Collections Are Paused, Not Cancelled

A loan is generally in default after 270 days of missed payments. Here is where things stand:

• The pause. In January 2026, the Department delayed involuntary collections, including Administrative Wage Garnishment and the Treasury Offset Program (which intercepts tax refunds and other federal payments). The stated reason was to let reforms take effect first. U.S. Department of Education
• It isn’t permanent. This is a transitional pause. A loan in default stays in default, and the government can resume collection when the pause ends. Some reporting expects garnishment and offsets to ramp back up this fall, though I did not find an official restart date. NatptaxThe College Investor
• Credit damage continues. The Department keeps reporting defaults to credit bureaus during the delay. Greenshades
• A second chance. The new law allows a second loan rehabilitation, where previously you had one in a lifetime. ACA International

If you are in default, the safest move is to contact the Default Resolution Group now and pursue rehabilitation, consolidation, or a payment plan before collections restart.

Public Service Loan Forgiveness (PSLF)

PSLF still forgives remaining federal loan balances after 120 qualifying payments while working in government or for a qualifying nonprofit. A controversial rule would have let the Department disqualify employers found to have a “substantial illegal purpose.” A federal judge vacated that rule on June 30, the day before it was to take effect. The Department has appealed to the First Circuit. NASFAANASFAA

For now, no employer was disqualified under it, and no borrower lost qualifying months. If you work in public service, keep certifying employment each year and keep your records. Note that RAP payments count toward PSLF, but a standard-plan payment counts only if it meets PSLF’s standard. MyEDDebt

Two Smaller Changes Worth Knowing

• Workforce Pell. Starting July 1, 2026, Pell Grants can cover shorter workforce programs, such as nursing assistance, early childhood education, and automotive mechanics. Pell money doesn’t need to be repaid, so check whether a short program qualifies before borrowing. CBS News
• Taxes on forgiveness. Some forms of student loan forgiveness are subject to federal income tax in 2026, which can lead to surprise tax bills. If you expect forgiveness under an income-driven plan, ask a tax professional how it will be treated. Yahoo Finance

What to Do Next: A Checklist

1. Log in to StudentAid.gov and confirm which loans you have and which plan you’re on.
2. If you’re on SAVE, find your 90-day deadline in your servicer account and apply for a new plan before it passes.
3. Compare RAP, IBR, and Tiered Standard using the Loan Simulator on StudentAid.gov. Don’t assume RAP is best for you.
4. Turn on auto pay by September 30 to lock in the 1% rate reduction.
5. Think twice before taking a new federal loan if you’re keeping an older plan such as IBR.
6. If you’re entering grad school, price out the gap between the federal cap and your total cost, and plan for scholarships, assistantships, or private loans.
7. If you’re in default, act before collections resume.
8. Watch out for scams. You never have to pay a fee for help with federal student loans. The College Investor

Frequently Asked Questions

Is student loan forgiveness ending in 2026?
No. PSLF and the 30-year forgiveness in income-driven plans still exist, but the rules and plans behind them have changed.

Do the new borrowing limits affect loans I already have?
No. The limits apply to new borrowing. Your existing loans keep their balances and fixed rates.

Can I stay on my current plan?
Often yes, if it’s IBR, Standard, Graduated, or Extended and you take no new federal loans. PAYE, ICR, and SAVE borrowers must move.

What happens if I ignore my SAVE notice?
You’ll be placed on a Standard or Tiered Standard plan, and payments will likely be higher than you expect.

Are private loans a good alternative to Grad PLUS or Parent PLUS?
Sometimes, for borrowers with strong credit. But private loans lack income-driven repayment, forgiveness, and most protections, so exhaust federal options first.

Note:

The 2026 student loan rules reward people who pay attention. Existing borrowers mostly have time and choices, but SAVE borrowers face real deadlines now. New students face lower federal borrowing limits and fewer repayment options. Court cases over the professional degree definition, PSLF, and SAVE could still change the picture, so check StudentAid.gov and your servicer regularly.

This article is for general information and isn’t financial or legal advice. Check StudentAid.gov or a qualified advisor for your specific situation.