There will be no more blank checks.
Federal loan limits will no longer be based on how much it costs to attend college, meaning borrowers won’t necessarily be able to rely on federal loans to meet all their financing needs. Beginning in the 2026-27 school year, parents can borrow up to $20,000 a year and $65,000 in total per child. Graduate students can borrow up to $20,500 per year (and $100,000 in total) unless they’re pursuing a “professional” degree in a field like law or medicine. Then the cap will be $50,000 per year and $200,000 in total. Annual limits for undergraduates won’t change, but for all students, there will be a lifetime borrowing maximum of $257,500. So what? Medical school costs an average of $238,420 and law school, an average of $217,480, according to the Education Data Initiative. If the cost of tuition doesn’t come down, borrowers unable to cover the full cost of an advanced degree with federal loans will have to look elsewhere to bridge the funding gap. What to do:• If you’ve got parent or graduate student loans now, don’t worry: The old rules will still apply during the upcoming 2025-2026 school year — and to people with existing loans.
• But if you’re thinking of graduate school, a private student loan could help fill the void as federal Grad PLUS loans are eliminated. For borrowers who qualify (and have a FICO credit score of at least 740,) SoFi is offering an alternative with no pre-set borrowing limit and a lower interest rate than Grad PLUS offers. Plus, you won’t have to pay the origination fee that’s standard with federal loans.
• If you have a child who will be going to college in the next few years, consider the federal student loan changes when you’re comparing the cost of different schools. And remember that your child can take out loans, too (parent loans often serve as a supplement to student loans.)
There will be no more $0 payments and SAVE is going away.
The system for calculating payments based on income will change significantly. Over the next three years the government will phase out a number of income-driven repayment options, including the newest and most affordable one, the SAVE plan — which was already facing major legal challenges. These will be replaced with a single new option called the Repayment Assistance Plan (RAP). Under the new RAP formula, borrowers will pay up to 10% of their adjusted-gross income each month, with the amount increasing 1 percentage point for every $10,000 in income they earn. It will require everyone to pay at least $10 a month (no one will qualify for $0 payments anymore) and make 30 years of payments — rather than 20 or 25 — before any remaining balance can be forgiven. Regular payment plans (where the monthly bill is based on how long you borrow the money) will also change. Rather than a standard 10-year option, the length of the loan will be based on the amount you borrow (10 years for under $25,000, 15 years for $25,000-$50,000, etc., up to 25 years for $100,000 or more.) So what? The rules around repaying federal student loans are generally getting more strict. Depending on the circumstance, monthly payments could be higher in the future, and it will be harder to get remaining loan balances forgiven. What to do: If you’re one of the 7.7 million people on the SAVE plan, start comparing your other options. You can either move to the Income-Based Repayment plan (IBR) — which will remain an option for current borrowers — or RAP, which isn’t available yet. To see how your payments would change, here’s a new RAP calculator from The College Investor and a side-by-side comparison of RAP vs. IBR. If you’re not a borrower yet, “it will be as important as ever to only borrow the amount you can reasonably repay,” said Sandberg. "Student loans can be enormous and the balance due will fall in your lap sooner than you think."It will be harder to get leniency on your loan payments.
Borrowers taking out loans on July 1, 2027 or later won’t be eligible for deferment or forbearance (a temporary reduction or waiver in your monthly payment) due to unemployment or economic hardship. And general forbearance can only be used for nine months within a 24-month period. So what? Borrowers who fall on hard times will have fewer relief options in the future. But income-driven repayment will be available through RAP, and loan consolidation and refinancing will remain options worth exploring. What to do: These changes, which don’t affect current borrowers, are yet another reason to take borrowing for college very seriously. If you haven’t decided where to attend, weigh the debt burden of each program against the potential benefits. And make sure to consider any student loan payments when building your emergency savings buffer.Related Reading
How Will Your Student Loan Payment Change With the Repayment Assistance Plan (RAP)? (Saving for College) Big Beautiful Bill Student Loan Changes 2025: What Borrowers Need to Know (Tate Law) Big Bill Means Big Changes For Student Loan Borrowers: What You Need to Know (Student Loan Borrower Assistance)Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
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