Earlier this year, Congress and President Donald Trump approved a massive budget reconciliation bill, often referred to as the “one big, beautiful bill,” which introduces significant changes to student loans. While these changes won’t take effect immediately, they will reshape the landscape for millions of student loan borrowers starting in 2026.
Among the most notable changes: grad student borrowing cuts, a complete overhaul of repayment plans, more limited relief options, and a shift in the types of financial aid available. These updates are written into law, making them immune to legal challenges—a departure from some Biden-era initiatives, which were open to litigation.
Here’s a rundown of the eight key takeaways you need to know to stay ahead of these changes. 8 Major Student Loan Changes From Trump’s Budget Bill: Next Steps for Borrowers
1. Major Cuts to Graduate Student Borrowing
Starting July 1, 2026, federal PLUS loans, which have been available to graduate and professional students since 2006, will be phased out. These loans allowed graduate students to borrow up to the full cost of attendance, but under the new rules, 8 Major Student Loan Changes From Trump’s Budget Bill: Next Steps for Borrowers, borrowing limits will significantly decrease.
New Loan Limits for Grad Students:
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Graduate students: Up to $20,500 per year, with a $100,000 lifetime limit.
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Professional and medical students: Up to $50,000 per year, with a $200,000 lifetime limit.
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Total borrowing limit (undergraduate + graduate): $257,500.
Without the option for Grad PLUS loans, many graduate students may need to turn to private loans, which often come with higher interest rates and fewer borrower protections, such as no eligibility for forgiveness programs.
Timing & Impact:
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These changes apply to students starting graduate programs after July 1, 2026.
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If you’re currently in grad school, or plan to start before June 30, 2026, you can still access Grad PLUS loans for the duration of your program (up to 3 years).
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Next Steps: If you’re planning on grad school post-2026, compare program costs carefully and explore other funding options, including private loans as a last resort.
2. A Complete Overhaul of Repayment Plans
The repayment plan landscape will see sweeping changes, especially for borrowers on income-driven repayment (IDR) plans. Starting July 1, 2026, the following IDR plans will no longer be available:
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SAVE (Saving on a Valuable Education) Plan
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PAYE (Pay As You Earn) Plan
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ICR (Income-Contingent Repayment) Plan
Existing borrowers who are currently on an IDR plan can stay on a modified version of the Income-Based Repayment (IBR) plan. This law also removes the financial hardship requirement to enroll in IBR.
New borrowers, however, will only have access to two repayment options:
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A modified standard plan (based on loan amount and duration).
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The Repayment Assistance Plan (RAP), which caps payments based on income and family size, with forgiveness after 30 years.
Timing & Impact:
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Current borrowers must switch to IBR by July 1, 2028, if they wish to continue an IDR plan.
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New loans taken after July 1, 2026, will only qualify for the RAP or standard plan.
3. Parent Borrowers Face Borrowing Limit Reductions
Parents who borrow Parent PLUS loans for their children’s education will face drastic reductions in borrowing limits starting July 1, 2026. These changes will limit how much they can borrow and drastically reduce repayment flexibility.
New Borrowing Limits:
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Annual limit: Up to $20,000 per student.
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Lifetime limit: $65,000 total.
Moreover, parent PLUS borrowers who take out loans after July 1, 2026, will not be eligible for income-driven repayment plans (IDR) or the RAP plan.
Timing & Impact:
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Parents who already have loans before the July 1, 2026 deadline can continue borrowing up to the cost of attendance for up to 3 years or until their child graduates.
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Parents should consolidate existing loans and enroll in an IDR plan before the cutoff to keep their options open.
4. Pell Grants Can Be Used for Short-Term Workforce Training
For the first time, Pell Grants (which provide up to $7,395 per year) can be used for short-term workforce training programs, including certifications in fields like HVAC, plumbing, or coding boot camps.
This change opens new pathways for students looking to gain specific skills without attending a four-year college.
Timing & Impact:
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The Workforce Pell Grant will be available starting July 1, 2026.
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To qualify, you must submit the FAFSA. Be cautious of scam programs and ensure any training program is accredited.
5. Stricter Limits on Deferment and Forbearance
In response to concerns about borrowers using deferment or forbearance as long-term solutions, the new law imposes tighter limits on these relief options.
Key Changes:
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Deferments for unemployment or economic hardships will be eliminated entirely.
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Forbearances will be limited to nine months within any 24-month period (down from the previous maximum of three years).
Timing & Impact:
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These new restrictions will apply to loans taken after July 1, 2027.
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If you face a financial emergency, try to use IBR or RAP plans, which are designed to provide more sustainable payment solutions.
6. Loan Forgiveness Becomes More Difficult
Income-driven repayment (IDR) forgiveness will now take 30 years of payments (up from 20 or 25 years). Parent PLUS borrowers, who won’t be eligible for the RAP plan, won’t have access to this type of forgiveness.
Timing & Impact:
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If you’re a current borrower, you have until 2028 to switch to the IBR plan to secure 25 years of forgiveness instead of 30 years under RAP.
7. A Second Chance for Loan Rehabilitation After Default
Starting July 1, 2027, borrowers who have defaulted on their student loans will have a second chance to rehabilitatetheir loans and return them to good standing.
Previously, borrowers only had one opportunity to rehabilitate their loans.
Timing & Impact:
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If you’re in default, contact the Default Resolution Group to plan your loan rehabilitation.
8. FAFSA Changes for Families with Farms or Small Businesses
The FAFSA will no longer count the value of a family farm, small business, or commercial fishery when determining financial need. This change will likely benefit families who own small businesses or farms, as they may now qualify for more financial aid.
Timing & Impact:
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This change takes effect July 1, 2026, impacting families with assets that were previously counted in the financial aid formula.
What You Should Do Next
With these sweeping changes set to roll out, it’s crucial to stay informed and make the right financial moves now. Consider these steps to ensure you’re prepared:
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If you’re a grad student, explore program costs and borrowing limits. Plan for private loans as a backup if needed.
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If you’re a parent borrower, consider consolidating loans and enrolling in an IDR plan before July 1, 2026, to preserve repayment flexibility.
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Current borrowers should review repayment options and switch to IBR before 2028 to avoid being moved to RAP.
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Families with farms or businesses should file the FAFSA every year to ensure they qualify for maximum aid.
Stay on top of these changes, and if needed, consult with a financial advisor to help you navigate the new rules for student loans effectively.
