The landscape of federal education loans is about to change. H.R. 1, passed in July 2025, introduced reforms to PLUS Loans, borrowing limits, and repayment plans. For students and families, the timeline of these changes will depend on whether they take out federal loans before or after July 1, 2026.

For current borrowers, the new law offers some flexibility and a transition period. Though, for future borrowers, loan caps have decreased, repayment options have narrowed, and one long-standing loan program has been eliminated. Understanding these changes now is critical for students and families planning their college and graduate school financing strategy over the next few years.

Here’s a breakdown of the most important changes.

PLUS Loans

There are a few significant changes to PLUS Loans that will affect families and students seeking options to pay for college costs.

Parent PLUS Loans

For new borrowers, defined as those taking a Parent PLUS Loan for the first time on or after July 1, 2026:

• Loan amounts are capped at $20,000 per year, per student and $65,000 in total per student
• Borrowers must use the new Standard Repayment Plan only (no other options, including the new Repayment Assistance Plan (RAP), are available to them)

Graduate PLUS Loans

The Graduate Plus Loan program is eliminated for new borrowers as of July 1, 2026.

Note: If you completed at least one year of grad school and borrowed before July 1, 2026, you may still borrow under the old Graduate PLUS rules for up to three years if you remain enrolled in the same program at the same school in order to complete the program.

Borrowing Caps

There are new limits to federal student loan borrowing effective July 1, 2026. Here are the details:

Unsubsidized Loans for Graduate Students

• The annual limit is still $20,500, but there’s now a lifetime cap of $100,000

Professional Degrees (e.g., law, medical)

• The annual limit is now $50,000 per year, with a $200,000 lifetime limit

All Student Borrowers

• There’s a new lifetime borrowing cap of $257,500 for students across all borrowing for undergraduate, graduate, and professional education (this excludes Parent PLUS Loans)

Repayment Options

Repayment options will vary based on whether an individual identifies as a current or new borrower.

Current borrowers, defined as those with no new borrowing after July 1, 2026, will have the following options:

• Continued access to all existing repayment options—including Standard, Graduated, Extended, and Income-Based Repayment (IBR) plans.
  • Note that borrowers who are enrolled in ICR, PAYE, or SAVE must transition out of those repayment plans by June 30, 2028; if no action is taken, borrowers will be automatically moved into the new Repayment Assistance Plan (RAP).
  • To remain in IBR, borrowers must enroll in IBR by June 30, 2028.
• Ability to take advantage of the new Repayment Assistance Plan (RAP)

New borrowers, defined as anyone who takes out a federal loan—or consolidates—on or after July 1, 2026, will have the following two options:

• A new Standard Repayment Plan that offers fixed payments over a term based on how much the borrower owes—options include 10, 15, 20, or 25 years.
• A new Repayment Assistance Plan (RAP), an income-based plan.

Repayment Assistance Plan (RAP)

The new Repayment Assistance Plan (RAP) replaces current income-driven repayment (IDR) plans and has several distinct features:

• The payment calculation will be based on Adjusted Gross Income (AGI) instead of discretionary income, which prior income-based repayment plans have used.

The payment will range from 1% to 10% of AGI, with a $10 minimum monthly payment and a $50 monthly principal reduction per dependent. The forgiveness timeline will be after 30 years of qualifying payments.

What This Means for You

If you plan to borrow on or after July 1, 2026 for undergraduate or graduate education, make sure you understand all new loan regulations, especially caps to borrowing, so that you can make the best decision on where you will attend and how you will finance those costs. A process called Negotiated Rulemaking will provide further parameters surrounding this legislation, so additional details could come as a result of that process. Know that we are here at MEFA to provide you information and guidance as you make decisions about college financing. Reach out to us via email at [email protected] or by phone at (800) 449-MEFA (6332). You can also request a 1-on-1 virtual appointment with one of our college planning experts. We look forward to assisting you.