New student loan rules have just gone into effect — an ever-changing and complicated array of repayment options have been replaced by a new set of repayment rules and limits on future loans. For families now considering how they will pay for college expenses this fall, it’s important to understand the changes.
Beware of adding new Parent PLUS loans
The first and most critical message in this column is to parents who are just about to take out NEW loans for their college juniors or seniors.
Loans you took in previous years had some favorable repayment options. However, if you take out even one more new Parent PLUS loan, disbursed on or after July 1, 2026, you may permanently lose access to the legacy income-driven repayment options that otherwise remain available for your earlier Parent PLUS loans. Families should understand these consequences before borrowing additional Parent PLUS loans.
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Also, Parent PLUS loans are now capped at $20,000 per year and $65,000 total per student, replacing the previous cost-of-attendance model that allowed much higher borrowings.
The danger of adding new student loans
And here’s a parallel warning for those taking out new federal student loans: Starting on July 1, 2028, borrowers with any loans taken out on or after July 1, 2026 — even if they have loans from before that date — will only have access to one income-driven repayment plan, the Repayment Assistance Plan (RAP).
So, students who are in their final years of college, as well as their parents, should be wary of taking on any new loans after July 1, 2026. They will invalidate previously available favorable repayment deals. Even a higher-cost private student loan might be a better choice for senior year.
The only repayment options on new student loans
Only two repayment options will be available for new loans disbursed on or after July 1, 2026: the Repayment Assistance Plan (RAP) and the Tiered Standard Plan.
RAP is an income-driven repayment plan with payments ranging from 1% to 10% of adjusted gross income, a minimum $10 monthly payment, interest subsidies, and principal reductions of up to $50 per month. Forgiveness occurs after 30 years.
The Tiered Standard Plan spreads payments over 10 to 25 years depending on total debt, with longer terms for higher balances.
The traditional income-driven repayment plan is staying, but it will generally only be available to borrowers who took out loans before July 1, 2026.
Both of the new repayment plans — RAP and Tiered Standard — are likely to result in higher monthly payments than previous programs such as SAVE, PAYE, and ICR, which are no longer available. Over 7 million affected borrowers in the old plans have 90 days to select a new plan, such as RAP, or face automatic placement into the Tiered Standard plan.
If you have been repaying under one of the discontinued plans, you should be contacted by your servicer. But don’t wait. Reach out immediately to your servicer to discuss your situation and to find your best options for the lowest monthly payment, before you are defaulted into the higher Tiered Standard plan.
Instead of relying solely on your loan servicer for accurate assistance, you might want to use the online calculator at StudentAid.gov/repayment-calculator to explore your options. Be sure to read the “assumptions” carefully, as these are estimates and not guarantees.
New borrowing limits for future loans
Today, many young adults are swamped with student loans — and facing new, tougher repayment terms. The new borrowing limits are designed to avoid that catastrophic debt, with interest piling up, in the future.
Borrowing limits for federal undergraduate loans remain unchanged, at $5,500 to $12,500 depending on year and dependency status; total limits are $31,000 to $57,500.
Graduate student loans are capped at $20,500 per year and $100,000 total for the degree.
Loans for professional students (law, medicine, pharmacy, etc.) are capped at $50,000 per year and $200,000 total.
All borrowers now face an aggregate federal lifetime loan cap of $257,500, excluding Parent Plus loans.
Public Service Loan Forgiveness
Public Service Loan Forgiveness (PSLF) remains available. Earlier proposed restrictions involving certain employers did not ultimately take effect after court action, so borrowers working for otherwise qualifying employers should continue to monitor Department of Education guidance. RAP payments count toward PSLF for otherwise eligible borrowers working full time for qualifying employers.
Rae Kaplan, of FinancialRelief.com, a student loan debt consultation firm says: “We’re entering one of the most confusing periods in the history of the federal student loan program. The rules are changing rapidly, and a single mistake — such as borrowing one additional Parent PLUS loan or enrolling in the wrong repayment plan — can cost a family tens of thousands of dollars. This is the time to get qualified advice before making decisions that may be impossible to undo.”
For families with students headed off to college and facing those tuition payment deadlines, it’s more important than ever to understand the alternatives — and the consequences — of borrowing for your education. And that’s The Savage Truth.
(Terry Savage is a registered investment adviser and the author of four best-selling books, including “The Savage Truth on Money.” Terry responds to questions on her blog at TerrySavage.com.)
©2026 Terry Savage. Distributed by Tribune Content Agency, LLC.
