The Donald Trump administration’s One Big Beautiful Bill Act will bring sweeping changes to federal student loans starting in 2026.
Signed into law on July 4, this massive piece of budget reconciliation legislation is daunting, but one of the most relevant sections for college students is the handling of federally funded student loans. Previous repayment plan options will be reduced and caps are being instated on how much individuals can borrow to pursue higher education.
As the repayment plan options are reduced from seven to two plans, enrollees in to-be-eliminated programs have until July 1, 2028, to switch to a new one.
Beginning July 1, 2026, new student loan borrowers will have to choose between two loan plans. These are either a standard repayment plan or the Repayment Assistance Plan, an income-driven repayment plan. The former allows for fixed payments over 10-25 years, while the latter allows payments of 1-10% of one’s income monthly, for up to 30 years. The White House said that the reduction of student repayment programs “condenses a maze of loan options into two.”
Notably, the new income-driven repayment plan employs a longer timeline than previous versions, which last 20-25 years rather than 30. The increased timeline worried Aissa Canchola Bañez, policy director at advocacy group Student Borrower Protection Center, who spoke to CBS MoneyWatch about the Repayment Assistance Plan, saying, “Borrowers are going to be forced to be in repayment for even longer.”
Dean Kahler, Vice Provost Strategic Enrollment Management at the University of Idaho, discussed what this means for currently enrolled students. “The federal student assistance program has been evolving quickly with the new administration. We are working to find student resources for our students,” he said. He encouraged those who need assistance to reach out to the student financial aid office.
Those enrolled in Biden’s income-based SAVE plan, which is to be eliminated under the OBBBA, will see interest begin to accrue on Aug. 1, according to the Education Department via the Spokesman-Review.
According to Newsweek, the Student Borrower Protection Center has also calculated that this new loan framework may raise annual loan payments by “$2,929 for typical degree-holding borrowers, $1,761 for those with some college but no degree [and] $2,808 for a family of four headed by a bachelor’s degree holder.”
Borrowing caps are also being instituted on certain loans. Parent PLUS loans, available for parents of dependent undergraduate students, will be restricted to $20,000 annually with a total cap of $65,000. Currently, the limit is set at the total cost of attendance, subtracting student aid received.
Grad PLUS loans, used to finance higher education, will be cut almost completely. Applications will no longer be accepted, while current borrowers will retain their access to the loans, according to Edsource. Both of these changes will begin on July 1, 2026.
Graduate students who need federal tuition assistance will now have to pivot towards Direct Unsubsidized loans for professional degrees, such as law and medicine, according to CBS Moneywatch. These will be capped at $50,000 annually and $200,000 lifetime. Nonprofessional advanced degrees, such as philosophy and history, will be capped per year at $20,500 and lifetime at $100,000.
“We are currently evaluating the rule changes to determine what impact it will have on our students and to determine if there are any options we can offer to our students,” Kahler said. “While our students’ [and] parents’ average federal debt load is lower than the figures indicated, there are students and/or parents who have exceeded or are approaching the loan limits under the new rules. We have had graduate students who utilized the GradPlus Loan program. We are exploring alternative loan options to which we can refer our students to help with their education costs.”
“I think there is a real problem with students taking loans for some master’s programs that aren’t worth it,” UI professor of economics Eric Stuen said. “But a big downside of the graduate loan cap will be for medical students, whose degrees would likely be worth taking hundreds of thousands of dollars of debt for. The new law could make it impossible for low-income medical students to pursue their degrees and so further limit the supply of doctors.”
Pell Grants, the largest source of federal aid for low-income students, will also face tightened eligibility. Kahler said he is not aware of any instances of exploitation at UI that could warrant these restrictions.
“We want to do our best to assure that the aid is provided to the students who need it most,” Kahler said. “We will do our best to help our students/families navigate the application process to obtain the maximum financial aid for which they are eligible.”
Students receiving full scholarships from colleges or universities will no longer be considered for funding from the program. However, Pell Grants will become more available for those in workforce training programs, expanding the previous limit of 600 hours and 15 weeks that could be covered.
The Student Aid Index, used to determine one’s federal aid eligibility, will now increase scrutiny, reducing higher-income families who can access Pell Grant Funding. Notably, the FSA website already explicitly states, “Federal Pell Grants usually are awarded only to undergraduate students who display exceptional financial need and have not earned a bachelor’s, graduate or professional degree.”
Finally, those still paying off their loans will be facing changes to deferment. Pre-OBBBA, loan borrowers were able to apply for a maximum of three years of deferment due to economic hardship or unemployment. This policy is visible on the FSA website.
However, starting July 1, 2026, deferment provisions for those facing economic hardship will be eliminated. If you lose your job and are struggling to meet your loan payment, you will no longer qualify to defer.
For more information on financial aid at UI, visit www.uidaho.edu/financial-aid. Financial aid staff are also available to discuss financial aid resources relevant to you and how your current aid might change.
Julia Kolman can be reached at [email protected].