9 Ways the Big Beautiful Bill Affects Student Loan Borrowers in 2025 and Beyond

President Donald Trump signed his One Big Beautiful Bill Act (OBBBA) into law on July 4, 2025, solidifying major changes to the federal student loan system that will affect both current and future borrowers. The final version of the bill came in at just under 900 pages of dense legalese that the average American cannot comprehend. (And trying to do so may just result in a pounding headache or an unexpected nap.)

But as unapproachable as it is to non-legal professionals, it’s important that we all understand the Big Beautiful Bill. It has major implications for our finances, our healthcare, and our education.

Below, we’ll look at the Big Beautiful Bill’s student loan ramifications specifically, but I’ve also put together this high-level guide to the Big Beautiful Bill and how it will affect your money.

Table of Contents

1. 1. Introduces lifetime borrowing limits
2. 2. Eliminates Grad PLUS loans
3. 3. Further limits Parent PLUS loans
4. 4. Private loans may become more prevalent
5. 5. Phases out most current repayment plans
6. 6. Revises the standard repayment plan
7. 7. Introduces a new repayment assistance plan
8. 8. Changes Pell Grant access for students with full rides
9. 9. New students will lose major deferment options

1. Introduces lifetime borrowing limits

Effective July 1, 2026, the government will impose a lifetime borrowing cap of $257,500 on all federal student loans, excluding Parent PLUS loans, which are taken out by parents, not students. This is the first time the government has put an aggregate ceiling on how much you can borrow for your entire secondary education.

2. Eliminates Grad PLUS loans

The lifetime cap is just the start. The Big Beautiful Bill also completely eliminates Grad PLUS loans, which currently let graduate students borrow up to the full cost of attendance each year. These loans will officially be eliminated on July 1, 2026.

So what can grad students do instead? As far as federal loans go, they’ll now only be able to take out Direct Unsubsidized Loans (considered the best graduate student loans in our analysis predating the One Big Beautiful Bill Act).

The major issue here, however, is these loans are capped at $20,500 a year, and the aggregate loan limit for grad students drops from $138,500 to only $100,000. For many, this won’t be enough to cover the cost of attendance, and without other federal options, students will be forced to turn to private loans.

3. Further limits Parent PLUS loans

Currently, parents can help their children with school costs by taking out a Parent PLUS loan, up to the cost of attendance each year, minus any other financial assistance the student will receive. The bill will severely reduce how much parents can borrow through this program, starting July 1, 2026.

Instead, parents will be capped at $20,000 per student per year (meaning they can borrow up to $20K per child enrolled in college at the same time). Parent PLUS loans will also now have a lifetime limit of $65,000 per student.

4. Private loans may become more prevalent

Aside from professional students, whose borrowing caps will increase under this new law, students face much tighter borrowing restrictions. Overall, there’s less money to access through students’ entire careers, both as undergraduates and graduates.

This could mean we see a higher number of students turn to private student loans to pay for school. While there are plenty of great private loan options, they don’t have the same federal loan benefits, such as eligibility for forgiveness.

Private student loans can also be tougher to qualify for without a cosigner, meaning more parents or guardians may need to step up and risk their finances to help their children attend college. Students with parents who are unwilling or unable to do so may not be able to get enough financial aid for college, especially as grad students.

If you’re a student or a parent of a student who suspects you’ll need at least some private loans to pay for college, start researching now.

5. Phases out most current repayment plans

The current landscape of student loan repayment options is admittedly confusing; even as a Certified Financial Education Instructor, I often get mixed up when thinking about the standard repayment plan vs. the various income-driven repayment plans (IDRs):

• Income-Based Repayment (IBR) plan
• Income-Contingent Repayment  (ICR) plan
• Pay As You Earn (PAYE) repayment plan
• Saving on a Valuable Education (SAVE) plan

The acronym soup doesn’t help.

The Big Beautiful Bill purportedly seeks to simplify the system by terminating most of the existing IDR repayment plans (ICR, PAYE, and SAVE) and modifying the IBR plan. The three plans being eliminated will be phased out; they will no longer be available to new borrowers starting July 1, 2026, but current borrowers have until July 1, 2028 (or sooner—TBD), to switch to a new plan. While each borrower’s situation is unique, it’s likely that borrowers currently on PAYE or SAVE plans will pay more on either of the new plans the bill creates.

As for the remaining, but modified, IBR plan: Current borrowers on that plan can stay on it, but it won’t be available to new borrowers starting July 1, 2026. The Big Beautiful Bill removes the “partial financial hardship” requirement for IBR in the meantime, making it easier for more borrowers to switch to it.

Starting July 1, 2026, however, new borrowers will only have two choices for federal student loan repayments:

1. A new Repayment Assistance Plan 
2. A new standard repayment plan

6. Revises the standard repayment plan

The OBBBA modifies the standard repayment. It’s still a fixed payment over the life of the loan, but rather than the standard 10 years, borrowers could have anywhere from 10 to 25 years, depending on how much they borrowed.

The table below breaks this down:

Student loan principal	Repayment period
Less than $25,000	10 years
$25,000 – $49,999	15 years
$50,000 – $99,999	20 years
$100,000+	25 years

7. Introduces a new repayment assistance plan

Although the Big Beautiful Bill does away with the existing income-driven repayment plans, it introduces one new income-based repayment plan, available July 1, 2026. It’s called the Repayment Assistance Plan (RAP).

Borrowers who enroll in RAP must pay at least $10 a month. (Right now, some plans have payments as low as $0 a month). Payments are calculated as a percentage of the borrower’s adjusted gross income (AGI), minus $50 per dependent on your tax return. The more you make, the larger the percentage of your income you’ll pay, up to 10% for salaries of more than $100,000 a year. The table below breaks this down:

Adjusted gross income range	Monthly payment
Less than $10,000	$10
$10,000–$19,999	1% of AGI
$20,000–$29,999	2% of AGI
$30,000–$39,999	3% of AGI
$40,000–$49,999	4% of AGI
$50,000–$59,999	5% of AGI
$60,000–$69,999	6% of AGI
$70,000–$79,999	7% of AGI
$80,000–$89,999	8% of AGI
$90,000–$99,999	9% of AGI
$100,000+	10% of AGI

8. Changes Pell Grant access for students with full rides

The Big Beautiful Bill’s student loan impact affects more than borrowing limits and repayment plans; it also revises Pell Grant access.

While it adds $10.5 billion of mandatory funds to the Pell Grant to address the funding shortfall, it restricts who is actually eligible.

Namely, students who otherwise receive grant aid from other sources that meets or exceeds the cost of attendance will no longer be eligible for the Pell Grant.

However, the law extends access to the Pell Grant to low-income students enrolled in short-term (eight to 15 weeks) job-training programs.

9. New students will lose major deferment options

One of the main reasons to choose federal loans over private loans has historically been the better student loan deferment options. However, the Big Beautiful Bill eliminates economic hardship deferment and unemployment deferment beginning July 1, 2027. The new law also affects forbearances, reducing them from 12 months at a time to only nine.

If you take out federal student loans before July 1, 2027, those remain eligible for deferment due to job loss or economic hardship.

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I advise my clients to increase contributions to their 529 plans, ideally held in a grandparent’s name, so the funds are not counted in the family contribution on the FAFSA.
I also recommend preparing all necessary documents in advance and submitting the FAFSA as soon as it becomes available on October 1. In addition, I encourage students to actively apply for scholarships, both merit-based and athletic, to help reduce overall college costs.