Here's some of the latest news that affects student loan borrowers.
Will your degree pay off? The federal earnings test explained
You may have heard something about the Trump administration cutting federal funding for certain programs. This can sound scary! You may be wondering, what if my program loses eligibility for federal student loans? Let’s take you beyond the headlines and the fearmongering to what is actually at stake with the new Student Tuition and Transparency System (STATS) and Earnings Accountability rule.
It’s commonly called the college earnings test, and variations of this federal rule have been around for years. This new version says that if an undergraduate program’s graduates don’t make more than someone with just a high school diploma, that program can no longer accept federal funding like federal student loans. For graduate degree programs, the benchmark is someone with just a bachelor’s degree (the graduate program’s field will be taken into account).
The new Earnings Accountability test is looking at the median earnings over three years for these groups, based on earnings data reported to the IRS. Programs that fail the test two out of three years in a row are eligible to lose access to federal funds.
The idea behind the rule is to limit federal support for programs that are not financially benefiting their students’ lives. Essentially, the federal government is saying they won’t support students taking on federal student loan debt for programs that don’t land them higher pay than they could get before they enrolled.
But what will this mean for you and your program?
First off, you don’t have to worry right now. The college earnings test will go into effect July 2027, and programs wouldn’t lose federal funding eligibility until summer 2028 at the earliest. So, you have some time. Secondly, no program or major is being blacklisted from federal funding. If a program fails the earnings test, the program isn’t shut down: it just isn’t eligible for federal funds anymore. Students can still pay for their program with other funds, such as private loans. We always recommend borrowers exhaust federal funding options before looking at private student loans.
Research from the think tank Third Way shows that this rule will mostly impact for-profit colleges, and most associate’s, bachelor’s and master’s programs will pass the test.
If you are concerned about the viability of your program, you can speak with the financial aid office at your school. In the meantime, you can look up your program’s outcomes with the U.S. Department of Education's College Scorecard or the Census Bureau's Post-Secondary Employment Outcomes tool.
So it’s after July 1, what does that mean for my student loans?
The One Big Beautiful Bill Act (OBBBA) and related legislation out of the Trump administration has changed much of the way federal student loans work, including introducing new borrowing limits and new repayment plans. These changes kicked in on July 1, 2026.
But what do these changes mean for borrowers like you? To help you wade through all the buzz, we compiled a list of our resources, covering everything from new loan limits to revamped repayment plans.
NerdWallet analyzed information about 2026 high school graduates going to college and found that more "than a third of those going to a public, four-year university (35%) will take on student loan debt.” That means, a lot of you are going to be taking on debt. You’ll want to make sure you pay close attention to the new federal student loan maximums.
First off, loan limits for new borrowers:
New Parent PLUS loans will have limits of $20,000 annually and $65,000 over a lifetime.
Grad PLUS loans are no longer available, but graduate students can still borrow federal student loans. Borrowers who are starting graduate school this fall will only be allowed to borrow $50,000 annually and $200,000 cumulatively for pre-professional programs like law and medical school. For other graduate programs, like MBA or MPP programs, the limits are $20,500 annually and $100,000 overall. The lifetime maximum federal borrowing limit for undergraduate and graduate education (excluding parent PLUS loans) is $257,500.
Current graduate students are allowed to continue to borrow up to the cost of attendance until their program ends (or for three years, whichever is sooner) as long as they don’t drop out or change programs and schools.
New repayment plans in place for any student loan borrowed after July 1, 2026:
Borrowers taking out new loans after July 1, 2026, will likely have to choose between a standard repayment plan and the new Repayment Assistance Plan. While preexisting loan limits are exempt under prior rules for current students, that’s not the case for repayment plans. If you are a new borrower your repayment options are limited to these plans.
The Education Department (ED) announced a new interest rate on federal student loans (6.52% for undergrads) and a 1% rate discount for student borrowers if they sign up for autopay.
Repayment plans for current and new borrowers now include:
Income-Based Repayment (IBR): Payments are limited to 10% or 15% of the borrower’s discretionary income.
Income-Contingent Repayment (ICR): Monthly payments are generally limited to 20% of the borrower’s discretionary income. ICR plans will end July 1, 2028.
Pay As You Earn (PAYE): Pay 10% of discretionary income for 20 years. PAYE plans will end July 1, 2028.
Standard Repayment: Entire loan is paid off in fixed payments over the loan term.
Repayment Assistance Plan (RAP): For any loan borrowed after July 1, 2026. Payment is 1 to 10% of the borrower’s annual adjusted gross income, and the loan term is 30 years.
Graduated or Extended Graduated Repayment: Payments start low and gradually increase every two years. Loan terms range from 10 to 25 years.
Please contact your loan servicer for more information.
Considering your options? Explore the student loan repayment calculator.
FAFSA opens early for the 2027-2028 academic year
The FAFSA for the 2027-2028 academic year launched ahead of the typical October 1 date and is available at studentaid.gov. Students and their parents must fill out this form to be considered for federal, state and school-based aid, as well as federal student loans.
How do I get started?
Before getting started, gather parents’ and students’ Social Security numbers, 2025 tax returns and bank statements, among other documents.
Set aside about 30 minutes to complete the form at studentaid.gov. New features for this year’s form: You can invite contributors via text message in addition to email. Also, ED says later this fall it will begin pre-populating student data from previous FAFSA forms, making later this fall, your data will be pre-populated from previous FAFSA forms, making renewal easier for returning students.
Remember that you must fill out the FAFSA every year to qualify for aid and loans.
What’s my deadline?
For the 2027-2028 school year, the federal deadline is June 30, 2028. But — and this is significant — submit it as soon as you can. Individual states and schools may set their own deadlines earlier.
Also, some aid is given on a first-come, first-served basis, so applying earlier gives you a better chance of claiming that free money.
Check out our guides here:
The FAFSA checklist.
The FAFSA requirements.
SAVE borrowers must switch plans
The Saving on a Valuable Education (SAVE) repayment plan faced years of legal challenges and created uncertainty for millions of borrowers. The One Big Beautiful Bill Act (OBBBA) scheduled SAVE to end by July 2028, but on March 9 a federal appeals court overturned a lower court’s decision and ordered an early end to the SAVE plan.
Loan servicers will contact borrowers on the SAVE plan and provide a 90-day timeframe to enroll in a different repayment plan. Borrowers who don't enroll in a new plan by the end of the 90-day deadline will be automatically enrolled in either the Standard Repayment Plan or the new Tiered Standard Plan that becomes available on July 1.
Borrowers can contact their servicer to change repayment plans prior to being contacted. Currently your options may include the Income-Based Repayment (IBR), Income-Contingent Repayment (ICR), or Pay As You Earn (PAYE). You will be able to stay on these plans until you pay off your loan or the plan ends, but only if you don't take out additional loans after July 1, 2026. ICR and PAYE are set to end July 1, 2028. After July 1, 2026, borrowers on SAVE will be able to enroll in the new Repayment Assistance Plan (RAP).
SAVE borrowers should make sure their contact information is up to date in their studentaid.gov and federal student loan servicer accounts, so they stay up to date with next steps.
Important note about SAVE and loan forgiveness
Borrowers who qualify for forgiveness while still enrolled in SAVE must apply to switch to another income-driven repayment plan before their loans can be discharged. Forgiveness will still be applied after the plan change is processed, but borrowers should keep track of qualifying payments and continue making required payments until the loan balance is officially discharged.
Income-driven repayment options are shifting
All current income-driven repayment plans, except Income-Based Repayment (IBR), will be sunset by July 1, 2028, as part of OBBBA.
Here are the IDR plans available for the time being and in the future:
The existing IBR plan will remain an option for current borrowers, but only for loans disbursed before July 1, 2026. It won’t be available for new loans after that time. The IBR application has been updated, so applicants no longer have to show a “partial financial hardship” to apply, making it more accessible to borrowers.
For student loans taken out after July 1, 2026, the new Repayment Assistance Plan (RAP) and a new tiered standard plan will be the only repayment options available. RAP will be the only income-based plan and will require 30 years' worth of payments before loan forgiveness.
Income-Contingent Repayment (ICR) and Pay As You Earn (PAYE) are still available to current borrowers with loans taken out before July 1, 2026, but those plans will be phased out by July 1, 2028.
ED recommends using its Student Loan Simulator to compare what payments would be like under different plans.
How the One Big, Beautiful Bill Act will impact borrowers
On July 4, 2025, the OBBBA was signed into law, and it will affect current and future student loan borrowers in many ways. Here are some key highlights.
Forgiveness taxable again: The OBBBA did not extend temporary tax relief for student loan amounts that are forgiven under certain IDR plans. Students who receive student loan forgiveness on or after Jan. 1, 2026, may be required to report the cancelled debt as taxable income on their federal (and possibly state) tax return, resulting in a student loan forgiveness tax bomb. This change does not apply to PSLF forgiveness. Also, it will not apply to borrowers who were eligible for forgiveness in 2025 but did not receive it until 2026 due to processing delays.
Grad PLUS loans: PLUS loans for graduate and professional students will no longer be available for new borrowers after July 1, 2026. Students with existing Grad PLUS loans will be able to continue borrowing under their current terms for a period of time. New grad and professional students will be subject to federal loans with lower borrowing caps.
Parent PLUS loans: Parent PLUS loans aren’t being eliminated, but they will have significant reductions in borrowing limits and won’t be eligible for income-driven repayment plans.
Limits to forbearance and deferment: Borrowers taking out new federal student loans after July 1, 2027, will face stricter guidelines for forbearance and deferment. Borrowers will no longer be able to qualify for a loan deferment because of unemployment or economic hardship.
Article sources
- 1.U.S. Department of Education. U.S. Department of Education Announces Next Steps for Borrowers Enrolled in the Unlawful SAVE Plan. Accessed Apr 30, 2026.
