Changes to federal student loans will take effect in the next few weeks, stemming from the passage of the One Big Beautiful Bill Act (OBBA) into law on July 4, 2025.
The legislation brings down the curtain on specific repayment options and loan borrowing limits, and alters others. Those changes take effect on July 1, 2026, and college loan borrowers need to be ready.
“The federal student loan system is more uncertain than stable right now,” Nika Booth, a personal finance educator and the founder of Debt Free Gonnabe, told NTD News. “Borrowers are back in repayment, but ongoing policy changes and legal challenges have made it harder for borrowers to know what applies to them and what to expect long term.”
Here's What to Know by July 1
With the OBBA college loan changes on the horizon, it’s a great time to get a grip on the policy shifts pushed by the Trump administration. Here’s what matters and why.New rules on loan repayments
The biggest shift is a push to simplify and, in some cases, to limit the existing system. “This includes the phasing out of most repayment plans currently available; new borrowing limits for graduate and professional students, and parents; tighter rules around loan forgiveness eligibility; and less flexibility for borrowers facing financial hardship,” Booth said.Benefit losses for older college students
Another shift that’s dominating the federal student loan conversation is the loss of financing benefits for graduate students. “The elimination of the Grad PLUS loan program on July 1, and the downgrading of the academic status of up to 13 advanced degree categories' eligibility under the unsubsidized graduate direct loans will have a major impact on working adults advancing their financial and personal careers,” Tom O’Hare, holistic college advisor at Get College Going, told NTD.A need for new gap alternatives
The other major change affects parents of dependent undergraduate students who look to the federal Direct PLUS program to cover the gap in educational costs. “Many students will need to find alternative resources now that the federal PLUS Loan will be capped at $20,000 per student, per year. Many will find themselves unable to pay, and will turn to a private education loan market, a home equity loan, and, for those with questionable credit, their retirement funds,” O’Hare said.Take Action to Adjust to New Federal Student Loan Realities
A college loan consumer’s best move post-July 1 is to complete and file the Free Application for Federal Student Aid (FAFSA) annually, and work with the financial aid office at the college or colleges a student is considering or is already enrolled in.“If a family or individual is struggling to meet their tuition payments, start a conversation with financial aid to see if alternative assistance can be recommended,” O’Hare said. “Be a strong consumer advocate by asking questions to understand interest rates, add-on fees, and repayment benefits. Learn about cancellation provisions and access to loan forgiveness programs.”
Other college planning experts recommend maximizing federal aid before turning to private loans. “Federal loans still offer the best borrower protections, which is so helpful for students who graduate without a clear career path in mind,” Leslie Tayne, founder and head attorney at Tayne Law Group.
Tayne also recommends that both families and borrowers truly understand the whole lending picture before signing on the dotted line. “This includes their repayment options and how their future monthly payments will be calculated, and most importantly, how those payments will fit into their long-term financial plans,” she said. “My last advice is to only borrow what you need, as the less you borrow today, the more financial flexibility you will have after graduation.”