Education Department Clarifies July 1 Student Loan Rules, Capping Some Borrowing Until 2029-30
Updated
Updated · Forbes · Jun 9
Education Department Clarifies July 1 Student Loan Rules, Capping Some Borrowing Until 2029-30
3 articles · Updated · Forbes · Jun 9
Summary
July 1 guidance updates spell out that borrowers entering the new Repayment Assistance Plan cannot carry most RAP forgiveness credit into IBR, ICR or PAYE if they later switch plans; only months paid at least at the 10-year standard amount can transfer.
Borrowers who take out a new federal loan or consolidate on or after July 1, 2026 will lose access to legacy repayment plans once that new loan enters repayment, leaving RAP or the Tiered Standard Plan as their only options.
PSLF remains available under legacy income-driven plans and under RAP, but not under the new Tiered Standard Plan, meaning public-service borrowers who become "new borrowers" will need RAP to keep earning forgiveness credit.
Borrowing limits also tighten on July 1, though students already in a degree program who have previously borrowed for it may keep current limits under an interim exception until no later than the 2029-30 award year.
With the SAVE plan gone, what is the best repayment choice for millions of borrowers facing a deadline?
Will capping federal loans lower college tuition, or just push students toward riskier private debt?
Will new student loan caps create a shortage of experts in fields like nursing and physical therapy?
Major Changes to Federal Student Loans in 2026: Borrowing Limits, Repayment Overhauls, and Who Gets Left Behind
Overview
Starting July 1, 2026, major changes will reshape federal student loans. The new rules redefine borrower categories, so anyone taking out or consolidating loans after this date becomes a 'new borrower.' These new borrowers will lose access to all legacy repayment plans, which limits their options for affordable monthly payments and could affect their path to loan forgiveness. The changes introduce new parameters for both current and future borrowers, impacting how they manage repayment and loan eligibility. Understanding these shifts is crucial for anyone planning to take out federal student loans under the new system.