Education Department Caps Student Loans at $257,500, Cuts New Borrowers to 2 Repayment Plans
Updated
Updated · CBS New York · Jun 2
Education Department Caps Student Loans at $257,500, Cuts New Borrowers to 2 Repayment Plans
3 articles · Updated · CBS New York · Jun 2
July 1 marks a broad federal aid reset: new borrowers face a $257,500 lifetime loan cap, while Parent PLUS loans will be limited to $20,000 a year and $65,000 total per student.
The overhaul, driven by the One Big Beautiful Bill Act, also ends new Graduate PLUS borrowing and narrows repayment for new federal loans to two choices: the Tiered Standard Plan or the new Repayment Assistance Plan.
Roughly 7.2 million SAVE borrowers, whose payments have been paused for two years during court fights, are expected to get notices around July 1 and must pick a new plan within 90 days or be placed in standard repayment.
Current borrowers can generally keep existing plans if they do not take new loans, but PAYE and ICR will be phased out by July 1, 2028, forcing enrollees to switch.
Pell Grant rules also tighten for students whose outside aid covers attendance costs, while opening eligibility to shorter workforce programs such as nursing assistance and automotive mechanics.
With the popular SAVE plan gone, how will new payment options affect millions of borrowers' monthly bills?
As new federal loan limits take effect, is a college degree becoming financially out of reach for many families?
Can the new Workforce Pell Grants create a truly debt-free path to high-paying jobs for American workers?
The 2026 Federal Student Loan Shakeup: New Borrowing Caps, Repayment Plans, and the End of Graduate PLUS
Overview
Starting July 1, 2026, the federal student loan system will undergo major changes due to the One Big Beautiful Bill Act passed by Congress in July 2025. These reforms will reshape how students borrow and repay their loans, but only affect new loans taken out on or after this date. Key updates include new borrowing limits and eligibility rules, such as capping annual and lifetime loan amounts for professional students. Borrowing for the 2025–2026 academic year remains unchanged. Understanding these changes is important for students planning their education and finances in the coming years.