Trump’s sweeping changes to student loans take effect today. Here’s what they mean for you

By Tami Luhby, CNN

(CNN) — Attention federal student loan borrowers: Major changes are coming your way, starting Wednesday.

That’s when many of the provisions contained in President Donald Trump’s sweeping One Big Beautiful Bill Act take effect.

Some borrowers, particularly lower-income folks, will be hit with higher monthly payments. New professional and graduate students will have to contend with stricter loan limits. Parents will also face tighter caps on how much they can borrow to help their kids.

The US Department of Education says the reforms implement “commonsense loan limits,” simplify repayment options and improve the health of the federal student lending system. But critics worry that the changes will make it harder and more expensive for students to finance their education and to repay their loans afterwards.

Federal student loans are critical to many Americans’ ability to go to college or grad school. Nearly 43 million borrowers have student loans, totaling $1.7 trillion, as of March, according to the Federal Student Aid office.

Here’s what borrowers need to know.

Changes to repayment options

The law, which Trump signed last July, created a new tiered standard repayment plan and a new Repayment Assistance Plan, known as RAP.

Under the standard plan, borrowers will have between 10 years and 25 years to repay their loans depending on the amount borrowed. Those with higher balances will have more time to repay their loans, which will result in smaller monthly payments.

In the RAP plan, borrowers’ monthly payments will be between 1% and 10% of their income, depending on their earnings – though they must pay at least $10 a month. They’ll get a $50 reduction in their monthly payments for each of their dependents, and remaining balances will be canceled after 30 years of payments.

Some borrowers will pay more under RAP than under current income-driven repayment options, student loan experts say, due to the way the loan repayment programs are structured.

Importantly, these new repayment plan options only apply to students taking out new loans, at least for the next two years.

Borrowers who are currently repaying loans won’t see any immediate changes. However, most existing repayment plans – including the Income-Contingent Repayment (ICR) plan and the Pay As You Earn (PAYE) plan – will be eliminated as of July 2028. At that time, borrowers will have to switch to the new tiered standard repayment plan, RAP or the Income-Based Repayment plan.

Those in the Saving on Valuable Education (SAVE) plan — a Biden administration-era income-driven repayment plan that was blocked by federal courts — are now being notified that they must switch into an alternate plan within 90 days. They will pay considerably more under RAP, experts say.

New 2026 graduates have the option of selecting the new RAP or tiered standard repayment plans but also have access to existing repayment options until July 2028.

Lower limits on borrowing

Graduate school students will no longer be able to borrow up to the “cost of attendance” for their programs.

The new limits — which take effect Wednesday for newly enrolling students and July 2029 for current students — will be $20,500 annually and $100,000 over a lifetime.

Also, the Grad PLUS loan, which allowed professional and graduate students to borrow up to cost of attendance, will be eliminated.

For those going to professional schools such as medical school or law school, their ability to borrow will be capped at $50,000 annually and at $200,000 over their lifetime. The prior limit was “cost of attendance,” which for US medical schools is an average of nearly $60,000 a year, according to an education research group.

In a controversial move, the Department of Education last year decided that certain healthcare studies – such as nursing, physician assistants and physical therapy – were not considered professional programs. That means students pursuing these careers would be subject to the lower $20,500 annual loan limit.

The move prompted several lawsuits, and a federal judge last week paused the implementation of the lower limits while the cases work their way through the court system.

Tighter caps for parent borrowers

A popular loan parents use to help their undergraduate students, the Parent PLUS loan, will be limited to $20,000 annually and to $65,000 total over the course of a student’s studies. The prior limit for these loans was the “cost of attendance.” The new limits apply to parents of new college students enrolling after July 1.

But parents of currently enrolled students who took out Parent PLUS loans can borrow up to the cost of attendance for those children until they complete their programs or for up to three academic years, whichever comes first.

Discount for automatic payments

Borrowers who sign up for automatic payments by September 30 will get a one percentage-point break on their interest rates, up from the current .25 percentage-point discount.

The reduced rate, which serves as an incentive to get more borrowers to enroll in auto pay, lasts through June 30, 2028.

The interest rate inches up to 6.52% for undergraduate loans and to 8.07% for graduate loans on Wednesday. The rate adjusts July 1 every year.

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