New Law Overhauls U.S. Student Loans Starting July 1

Millions of U.S. students and families face a revamped federal student loan system as of July 1. The "One Big Beautiful Bill Act," passed in 2025, introduces sweeping changes to borrowing limits and repayment alternatives. The Department of Education aims to streamline the complex system, which previously offered seven different payment plans, and address the nation's $1.9 trillion student debt.

Key adjustments include new limits for Parent PLUS loans, which no longer cover the full cost of attendance. Graduate PLUS loan limits are also affected, with a cap on accumulated debt. Notably, new applicants will no longer have access to Graduate PLUS loans, which previously covered most postgraduate financing needs. A lifetime limit of $257,500 in educational financing will apply to most federal loan recipients from this date.

New borrowers will have only two repayment options: the Revised Amount Due (RAD) plan and the Tiered Standard Plan. The RAD plan adjusts monthly payments based on income, while the Tiered Standard Plan offers a fixed payment schedule. Borrowers with existing federal loans before the law's effective date can retain their current plans if they do not take out new loans after July 1. This includes the Saving on a Valuable Education (SAVE) plan, which offers a 90-day window for participants to select a new payment modality.